How Loan Against Property can be the choice for you

When financial setbacks hit us in medical emergencies, weddings, education, travel, or investments, we have two options. We can redeem our savings or opt for a loan to manage our finances. In such cases, opting for a loan from a lender that offers affordable interest rates and flexible loan tenure may be the best option.

The most recommended option to manage your finances during a cash crunch is the loan against property. It is a secured loan which means that borrowers are required to pledge their property as collateral. Since the lender’s risk is reduced, the interest rates are low compared to personal loans.

 

Reasons to opt for a loan against property:

A loan against property, which is also known as a LAP loan, is available for salaried and self-employed provided they are the legal owners of their properties. Key benefits of opting for LAP are:

The maximum loan amount and longer loan tenure

In terms of the loan amount, each lender has a different policy. You can receive up to 70% of the insured declared value of your property as a loan. However, the eligible loan amount is subject to your need and your capacity to repay within the stipulated EMIs.

Furthermore, you can avail of a relatively longer repayment loan tenure that allows you to plan your budget and repay the loan amount with interest without defaulting on your loan. For instance, a loan amount of Rs. 10 lakhs can be repaid ten years after approval.

It serves multiple purposes.

Another benefit of a LAP loan is that there is no restriction on the end-use of the sanctioned loan amount. You have the freedom to use it for anything you want, be it a medical emergency, paying for an upcoming wedding, or funding your business expansion plan. A LAP loan can also be treated as loans for small businesses or to cover big-ticket purchases like purchasing a car or going on an international trip.

Competitive interest rates

Since the lenders are assured that they will recover the loan amount if the borrowers default on payments, the interest rates compared to unsecured loans are significantly low. A lower interest rate means you will be paying less in EMIs, and hence, an added benefit of managing your monthly budget. When you pay less in interest, you can focus on managing other financial obligations at home.

Minimal documentation requirement

Compared to unsecured loans, the loan against property documents required is a bare minimum, making loan disbursal quick.

The loan against property documents required across all platforms are:

  • Identity and age proof: Aadhaar Card, PAN Card, Passport, Ration Card, Voter ID Card, Driving License, or Employee ID Card.
  • Address proof: Passport, Ration Card, Voter ID Card, Driving License, or Utility Bills.
  • Self-employed: Last three months’ bank statements
  • Salaried Person: Salary slips, ITR, or form 16.
  • Property documents: Original sales deed, possession letter, and NOC from society.

 

Relaxed norms of eligibility

In case of a loan against property, the current value of your property will impact your application instead of your source of income. Unlike personal loans, the norms of eligibility are more relaxed. The bare minimum requirements are:

  • You must be either an employee of an organization or must be self-employed.
  • The minimum age at the time of application is 21 years and 65 years during the loan maturity.
  • You must have an active bank account.
  • If there are co-owners, they will be co-applicants for the loan.

Continuous ownership

Another reason you should opt for a loan against property is, you can acquire a loan against your residential or commercial property and yet continue having the ownership of your property. It allows you to continue using your commercial property to earn income.

It is worth noting that if you default on your loan payments, your lender has the legal rights to auction your property and recover the loan amount with interest. Therefore, ensure to pay your EMIs on time to avoid legal hassles in the future.

Conclusion

Suppose you need a large amount of money to fulfil a big-ticket purchase requirement, but you do not wish to pay a lot in interest. In that case, applying for a loan against property is the best available option to manage your finances without hurting your savings.

 

 

By Russell Crowe

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