A LAP or Loan Against Property is a secured loan sanctioned against an asset as collateral. The lending institution decides the loan amount depending upon the property’s market value, generally around 70%. It is a secured loan that offers several benefits to borrowers. Business owners and individuals borrow these loans to address various life expenses, such as marriage, education, business expansion, house construction, and product development. Numerous reasons like low mortgage loan interest and easier availability make them a perfect choice for borrowers. Read on to learn more benefits of availing of a LAP loan.
Continued Property Usage
A borrower can use the property loan document as a mortgage for LAP, whether a self-occupied, rented out, or vacant property. Even after pledging property as collateral, the owner does not lose the ownership and continues using it for residential or commercial purposes.
Bigger Loan Sanction
When an individual avails of a Loan Against Property, the lending institution offers a large percentage of the property’s current market value as a credit amount. It is a significant amount borrowers can use for personal or professional reasons. Depending on the property type, the loan sanction may vary from 60-70% of the property’s value.
Lower Interest Rates
Undoubtedly, a lower mortgage loan interest rate is one of the most significant reasons to opt for LAP. Since the lending institutions have the right to foreclose the property in case of default, they have a shallow risk factor for lending such loans. Subsequently, they charge a lower interest rate, lowering the EMI amount and minimising the borrower’s financial burden.
Tax Benefits on Interest Payments
Tax benefit on interest payments is another standout feature of a LAP loan. However, these benefits only apply if the borrower uses the loan amount for specific purposes. Here is a detailed breakdown.
· Section 37(1) allows a tax deduction on processing charges and interest paid for LAP if the borrower uses it for a business-related purpose.
· Section 24(B) gives a tax deduction of up to ₹ 2 Lakh on the interest payment if the borrower uses it to purchase a residential property.
No tax benefits are applicable if the borrower uses them for personal expenses like travel, education, wedding, and vacation.
Longer Repayment Tenure
With a secured Loan Against Property, the borrowers get the liberty to repay the borrowed amount over an extended period. While the repayment terms differ between loan companies, one can quickly get a loan tenure of up to 15 years to pay back the money. With such a long tenure, borrowers can opt for pocket-friendly EMIs to pay each month and optimise their repayment process schedule. Coupled with lower mortgage loan interest rates, the longer repayment terms of LAP make them an extremely affordable and efficient option to support various purposes.
Quick Loan Approval
Since the Loan Against Property is secured, applying and getting approval is much easier and faster than collateral-free loans. With a LAP, the finance company has a guarantee for the amount it lends. Therefore, the security makes getting loan approval easier for loan seekers. Moreover, LAP is easily accessible for both self-employed professionals and the salaried class. All they need to do is submit the property loan document to the lender and get the loan sanctioned within a few hours.
No End-Use Restrictions
Individuals and business owners love LAP loans as lending institutions do not restrict their end usage. That is always the case with Home Loans, Business Loans, Vehicle Loans, and other loan products. A LAP loan allows borrowers to use the amount for various personal purposes, such as business expansion, weddings, education, and medical emergency. They can borrow the loan according to their requirement and repay in EMIs they can easily afford each month.For businesses and individuals, a Loan Against Property is incredible for financing various goals of their lives. However, obtaining a LAP loan is still challenging, primarily due to massive competition among loan companies. So, before zeroing in on an NBFC, check their mortgage loan interest rates, documentation requirements, customer services, and processing speed to enhance the overall experience.
