Loan Against Property
What is Loan Against Property?
Loan against property, as the name suggests, is applicable for individuals applying for a loan for purchase of a land/property, be it for commercial or residential interests. This comes off as a better option during times of financial crisis. Loan against property remains one of the most sought after loans in India, mainly due to the ever increasing real-estate prices.
A take-over of existing loan, with options of refinancing is also made available by most banks.
Characteristic of Loan Against Property
- A Secured Loan, it is offered only when the individual/applicant keeps the property with the bank as security. The loan interest rates are allocated based on the individual’s monthly salary, amount taken as loan, interest rates etc. Rate of interest of loans are again based on the customer’s profile (salary, credit history etc).
- Repayment periods are usually of the range of 10-15 years and hence are long-tenure loans.
- Minimum amount offered as loan is Rs 50,000/-
- The customer/applicant is also responsible for payment of charges towards administrative procedures while processing the application, along with the processing fee.
What purpose can one use loan against property funds for?
- Funding business and working capital needs of individuals, partnerships, private companies and SME's
- To purchase new property by pledging existing property
- As lower cost alternative to personal use and uses such as marriages, education, vacation, home renovation, medical emergency
Benefit of availing Loan Against Property (LAP) instead of other loans?
- As loan against property is secured against property, banks offer lower rate of interest compared to unsecured business loans or personal loans
- Loan tenure can be up to 18 years leading to lower EMI compared to unsecured loans where loan tenure can only be up to 5 years
- No additional collateral or guarantee is required
- Loan can be taken in name of company/ firm even if the property is owned in individual name of partners/ directors