Introduction
For several individuals or business owners, a major financial hurdle can come as an unwelcome surprise. One possible solution to such monetary crises is a loan against property (LAP). It helps you unlock the hidden wealth tied up in your property without selling it. From funding education and wedding expenses to business expansion and debt consolidation, a loan against property can act as a fruitful financial tool to meet your comprehensive needs. Amidst the plethora of borrowing options available, a key reason why individuals choose LAP is the lower loan against property interest rates.
Understanding The Concept of Loan Against Property
A loan against property is a secured loan that an individual borrows from a bank or a non-banking financial company (NBFC) by pledging their property as collateral. The choice of property to be pledged can vary from a self-occupied residential property, an occupied or rented commercial property, or even a piece of land.Â
Moreover, LAP comparatively offers higher loan amounts, lower interest rates, flexible tenure and simpler eligibility criteria than an unsecured loan because it is much less risky for the lender.
Unlocking The Hidden Value of Your Property
Typically, a property is considered a dead asset, but by availing a loan against property, you can access the hidden funds that were previously untapped. The loan amount sanctioned is generally a certain percentage of the property’s market value, usually ranging between 60%-70%. Therefore, if your property’s current market value is high, you can expect a substantial loan amount.
Reasonable Interest Rates
A crucial factor influencing a borrower’s decision is the loan against property interest rates. Since LAP is a secured loan, the risk for lenders is comparatively lower, making the interest rates attractive. In contrast, unsecured personal loans have higher interest rates due to the higher risk involved.Â
This makes LAP an attractive option for potential borrowers, especially those with significant cash needs such as business owners, self-employed professionals or individuals with big-ticket expenses.
The Power of Flexible Repayment
Flexible repayment options and extended loan tenure are among the major benefits of a LAP. It reduces the burden on the borrower as they are under no immense pressure to repay the substantial loan amount. Tenures for LAP can extend up to 15 or even 20 years, making it convenient for borrowers to manage their cash flow efficiently and repay the loan without straining their finances.
Quick Disbursement
Usually, loans against property are disbursed faster than traditional loans. Once the property’s value assessment and the borrower’s repayment capacity analysis are done, the lender disburses the loan quickly, meeting your urgent financial requirements.
Due Diligence Before Availing LAP
While the prospect of unlocking hidden funds through LAP appears advantageous, it’s worth noting that your property is at stake. Failure to repay the loan within the stipulated period could lead to the loss of the mortgaged property. Therefore, it becomes crucial to ascertain your repayment capacity before availing such a loan.Â
Moreover, ensure to compare the loan against property interest rates, terms, and conditions offered by various lenders to arrive at a loan that best suits your needs and repayment capability.
Conclusion
A loan against property can be your saving grace in times of substantial financial need, enabling you to unlock the hidden value within your assets. With attractive interest rates, substantial loan amounts, and flexible repayment tenure, LAP presents itself as a viable financial tool.Â
However, one must not forget the fact that their property is at risk in the event of default. Therefore, holistic consideration of the financial situation, thorough research about the market rates, and meticulous planning of repayment strategy can help make the best use of a loan against property.Â
In a nutshell, a loan against property is a powerful instrument to unlock hidden funds from your property. It respects the value that your property holds and allows you to utilize it wisely for your financial needs.Â
