For security reasons, your session has been timed out. To continue, Please login.
Loan Against Property
A loan against property (LAP) gets you capital based on the value of your property. It is available for both salaried and self-employed persons and against commercial as well as residential property. The loan against property helps you to get funding to meet varied business and personal requirements.
It generally gets used for business expansions, higher education, wedding expenses, buying machinery, closing off high cost debts. The loan is given as a certain percentage of the property’s market value, usually around 40 per cent to 60 per cent.
Factors to consider before taking a Loan Against Property
Evaluate your eligibility
The eligibility of your Loan Against Property depends on the following factors i.e. age, income, existing financial responsibilities, repayment and credit history, and the property value as per the current market rates. You can also include your spouse or child, even if they are not a co-owner of the property as a co-applicant for the loan, to help improve your eligibility.
You need to submit documents to check your eligibility; the documents will involve income and address proof, as well as that of the property.
Choose Tenure with benefits
LAP borrowers may find comfortable with the longer tenure offered, but in the long run they end up paying more interest which makes the loan costlier. Before shortlisting the bank/lender understand how much the loan is going to cost. Choose between floating and fixed interest rates by keeping an eye on the fluctuations and predictions of the market. Shop around for lenders who offer competitive interest rates.
It is still necessary that you plan your repayment in advance and have a strategy in place to repay your borrowed amount. If you want to pay off your debt, you have to make some tough choices. The first of them is which debt repayment option you will choose. There are pros and cons of each option and the one that’s best for you depends on your debt, your income, your monthly expenses, the importance of your credit rating, and how much of the debt you want to pay off.
No Tax Benefit
LAP is not eligible for any tax benefits or deductions. However, you can continue to claim the available tax exemptions if you have an existing home loan on the same property against which you have taken a LAP.
In case of multiple owners of the property, they all need to be co-applicants when applying for a LAP, because the lender needs to be certain that all owners of the property have agreed to offer the property as security to take the loan. You can also include your spouse or child, even if they are not a co-owner of the property as a co-applicant for the loan, to help improve your eligibility.
Read the terms carefully
Be careful about the add-on charges and penalties. It’s not just the interest that you pay. There are additional charges such as administrative and service charges or processing fees. Also, there are penalties like on pre-payment of the loan. Consider these when comparing the deals offered by various lenders. Reviewing the fine print can help you ensure you are dealing with the right lender; locate any hidden charges that can affect your affordability, and help you stay cautious about any extra expenses you may incur.