There are two different kinds of loans: secured loans and unsecured loans. Loan against property (LAP) is a type of secured loan that occurs when the borrower pledges his or her residential or commercial property as security to get a loan from a lender, such as a bank or other financial services provider, for a specific sum. LAP loan is offered to both salaried and independent contractors.
Lower EMIs due to loan against property interest rates being lower than those of home loans are only one of the many advantages of LAP. Since LAP is a secured loan, being approved to use them is both simple and quick. On LAP, there are also minimal or no prepayment fees.
Additionally, LAP generally has no end-use restrictions. This means that the money borrowed against your property can be employed for a range of things, including meeting your personal needs and funding your business, education, marriage, and other major life events. Nevertheless, these are not the only applications for LAP.
The following are the purposes of loans against property, according to Jairam Sridharan, MD, Piramal Capital & Housing Finance.
Purchasing a home
Purchasing a new home has several perks, including the ability to rent it out to make additional money or use it as a summer or weekend home. A loan against property is a great way to get money since it permits borrowers to get a loan and use a piece of property they presently own as collateral. Furthermore, the borrower may remain to use the existing property for either residential or commercial purposes even after it is mortgaged to the lending institution.
A longer period of repayment
LAP often has a flexible and lengthier repayment period, up to 15-20 years, compared to a personal loan. Moreover, a longer loan term results in a lower monthly EMI, which eases the borrower’s economic strain. Additionally, the borrower has the option to partially prepay the loan amount at any time during the term with minimal to no prepayment penalties.
Obtain financing for your company’s expenses and growth:
For business owners, LAP has a number of advantages, including alternative end uses, relaxed qualifications, and extended repayment period, among others. These ability makes taking out a loan against property especially useful for business owners. Regarding flexibility of end use, the money can be simply applied to whatever urgent company requirement exists—capacity expansion, hiring personnel, buying new, etc.
Control significant costs:
A borrower may use a loan secured by property for a variety of purposes. It can be used to pay any significant cost, such as paying for your child’s college education, a trip abroad, a wedding, a medical emergency, or just to expand your business. LAP may also be used for working capital requirements, house repairs, or the buying of a new property.
Obtain a significant penalty:
If a borrower needs big sums of money all at once, LAP is a great option. Lenders sanction amounts between 65% and 75% of the collateral’s current market value when borrowers pledge any kind of property as protection. A borrower may be given an even bigger amount by the lending institution to cover his or her financial needs, depending on eligibility. As a result, the amount a borrower can access by choosing LAP is probably larger than what they could with a personal loan. For business owners, LAP has a number of advantages, including alternative end uses, relaxed qualifications, and extended repayment period, among others. A borrower may employ a loan that is real – estate in a variety of ways. Any large expense, such as paying for your child’s college tuition, a trip overseas, a wedding, or a medical emergency, can be handled by it.