Property is a valuable asset that not only extends a roof over the head throughout life but also acts as a savior in times of emergencies. For instance, a business owner who needs cash desperately need not apply for a personal loan that levies a high rate of interest. Instead, the individual can opt for a loan against property (LAP) and easily tide over the monetary need.
A LAP is a one-of-its-kind credit instrument that comes with lower mortgage loan interest rate and allows one to utilize the monetary potential of an existing immovable asset while legally holding its title.
What Is a Loan Against Property (LAP)?
A secured loan that you avail of against a property that you already own is defined as a ‘LAP’ in India’s housing finance world. Owing to flexible tenors and comparatively lower interest rates, LAP has emerged as a popular long-term loan among self-employed and salaried individuals in the country.
Top Features and Benefits of a Loan against Property
- Secure loan: The lender has the building/land/house as collateral. To recover losses after the due date, a lender is entitled to sell off the asset.
- Lower property loan interest rates: As a loan against property is a secured credit option, the interest rate is typically lower when compared to other types of loans like a personal loan, which is categorized as unsecured debt.
- Long and flexible tenors: A loan against property tenor is usually longer and one can secure a significant amount when compared to a personal loan, which cannot go beyond Rs. 10 lakh.
- Tax deductions: Borrowers can claim tax reductions on the interest of a loan against property, as. However, borrowers cannot claim tax benefits on the principal repayment of a LAP.
Many times people seek a loan to build a property, which they are going to pledge to a lender. It indicates that the property which is going to be built with the loan amount will serve as a security for the loan and must be considered in a loan against property. This is not what the terms of a loan against property entail. To avail of a LAP loan, the property must be in existence.
Properties Covered in a LAP Loan
LAP can be taken on properties, including the following:
- Industrial properties – Warehouse, factories, and processing units
- Commercial properties – Malls, office buildings, hotel buildings, shops, and complexes
- Residential properties – Residential homes, individual houses, flats, and apartments in cities like Delhi, Bangalore or loan against property in agra can be availed with some basic eligibility criteria like propery owner documents, credit history and so on.
- Other properties, such as hospitals, cinema halls, schools, etc.
- Can also be availed of against lands. It must, however, be non-agricultural land
- Agricultural property cannot be pledged for a loan against property as it is not mortgage-able
- Un-built or under-construction properties – Banks/NBFCs maintain a list of builders approved by them. If an under-construction property is being undertaken by an approved builder, then a loan can be secured without much hassle. However, if it has been undertaken by an unapproved or unauthorized builder, the property has to be 90% finished for obtaining a loan against property. The percentage of completion also needs to be certified by an architect.
While sanctioning a LAP loan, the lender considers the following factors:
- Property registration
- The current market value of the property
- The eligibility of the LAP loan borrower
- The applicant’s income
- Whether the borrower is a salaried individual or self-employed
- Credit profile, history, and score — to assess the borrower’s creditworthiness
If all of this is making you confused; fret not. You can use smart tools like a LAP EMI calculator and a LAP eligibility calculator to find your eligibility and possible EMI outgo.
A secured loan like a loan against property can certainly help in fulfilling urgent or significant monetary needs and help make long-overdue wishes come true. What are you waiting for? Apply now for a Loan against Property from a chosen lender and give wings to your dreams now!