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9 Amazing Benefits of Loan Against Property

A Loan Against Property (LAP) is a popular secured financing alternative. Hence, banks feel comfortable in offering these loans. The banks are lenient in matters regarding credit score while approving LAP. Your income, repaying capacity, and the value of the collateral are essential criteria while dealing with these loans. The LAP is in fact, a secured Personal Loan. Here are nine amazing benefits of LAP.

1. Secured loan

The chances of getting a secured loan are higher in comparison to an unsecured Personal Loan. The unsecured loans are risky propositions for banks. Hence, they do not hesitate much when you Apply for a Loan Against Property. These loans are an excellent way of improving your credit score as you do not need a high credit score to obtain these loans. Repay your instalments on time and improve your credit score.

2. Variety of purposes

The LAP is similar to the Personal Loan in many ways because you need not disclose the end use of the loan to your bank. You are free to use the funds for any purpose. The requirement can be educational needs, meeting medical costs, purchasing a new house, travelling, catering to wedding expenses, or even setting up a business. The banks pay more attention to the income, repaying capacity, and the value of the collateral.

3. Cheaper option

The LAP is a relatively cheaper option as compared to the unsecured Personal Loans or the Credit Cards. It is because the risk element in a LAP is less in comparison to the unsecured Personal Loans. Hence, you get the LAP at a lower rate thereby making it a popular option.

4. Flexibility

The unsecured Personal Loan has a maximum tenure of 60 months. The LAP has a lot more flexibility because banks are comfortable with tenures exceeding 10 or 15 years as well. There are different products for the LAP. You have the overdraft facility where you pay interest on the amount you use. You also have the term loans that necessitate repayment by EMIs (Equated Monthly Instalment). A more extended tenure results in a lower EMI. Hence, they are comfortable loan options in an emergency.

5. Various types of security accepted

You can take LAP against residential property as well as commercial property. The principal requirement is that you should own the property and be eligible to create the equitable mortgage in the bank’s favour. Banks prefer the property to either be vacant or self-occupied. You have different LAP products where you can take Loan Against Property given on rent. Senior citizens have a unique LAP product known as Reverse Mortgage. Some banks allow LAP against properties under construction. Banks ensure to get legal clearance and do the evaluation of the property before approving LAP.

6. Tax benefits

The Government of India has announced various tax benefits for Home Loan owners and business enterprises. You can take the LAP for a variety of purposes ranging from home repair to starting a business enterprise. You can claim benefits as applicable to Home Loans if you can prove that you have taken the LAP for home repairs. You have to prove that you have availed the loans for improving your business in case you avail the tax benefits on interest payment.

7. Higher eligibility

Banks consider the income particulars and value of the property while approving LAP. You can get a maximum of 90% of the property value when you apply for a Loan Against Property. Combine the higher eligibility with a longer tenure, and you have an attractive proposition on your hands.

8. Pre-closure facility

Just as you can pre-close your Home Loans, you can do so with your LAP without having to pay a foreclosure penalty if you have a floating rate loan. The facility is not available in the unsecured Personal Loans. In case you have opted for a fixed rate option, you might have to pay the prepayment penalties.

9. The Top Up facility

The LAP is a long-term loan ranging for periods between 10 and 15 years. Some LAPs can go even up to 20 years. Under such circumstances, your income and repaying capacity can increase. The value of the property can also increase manifold. Hence, you become eligible for a top-up facility. It is an excellent facility as you have access to more money to cater to your requirements.

You have seen nine amazing benefits of Loan Against Property. Keep these points in mind when you apply for LAP. Many banks offer the facility of LAP today. Hence, you have a lot of competition. It is good for the customer as they get the benefit of better rates.


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