The best way to fulfil your financial requirements is by mortgaging your assets. You can use your funds without even selling them and pay a lower interest rate in return for assets than unsecured loans. A loan against property is the best and most popular method to have back up of your assets. Your residential property, whether it is rented or self-occupied, commercial property, or any piece of land that is registered in your name, is defined as a mortgage by the lenders. The best advantage of LAP loans is restrictions on the end of loan procedures like personal loans or top-up loans.
One can also get a LAP loan in the form of an overdraft facility other than EMI mode. This is beneficial to the businessmen and self-employed because they can withdraw their funds at the time of capital financial requirements. Interest will be charged only at the utilized funds.
Although there are many advantages of Loan against property, they may not give benefits to others. Therefore, before you opt for a LAP loan, you should be aware of some of the following material facts.
Loan against property interest rate
If we see the majorly essential point about LAP, then, of course, it would be the lower interest rate, which is evaluated with the help of a loan against the property interest rate calculator. Generally, a range of interest rates may lie between 10 to 14%. But if you are looking for a loan offer to buy house finance, house renovation, or child’s loan, then an education loan or house loan would be a better and cheaper option than anything else. You can only go for a LAP loan when you are not clear about your loan’s purpose.
Amount of Loan
The amount of the LAP loan is determined based on the market value of your property which varies from 40% to 70%. The total amount of loans can reach up to crores. For example, a particular bank can give a loan of up to Rs.8 crores. Therefore, if you have a high-value property and the high limit of your loan cannot fulfil your needs, only then apply for LAP. Because choosing a loan against property for a bit of loan amount will not be worth it as it only charges a small loan.
Loan tenure of loan against property
The tenure of the LAP loan can be extended up to 15 years. One can use these for short-tenured loans, for example, car loans or personal loans—the EMI affordability of your loan increases due to the Lower EMIs by long loan tenures. Still, the interest rates become higher in long tenures that may create many troubles in financial status. For example, if your salary is around Rs.70,000 and you want a loan of Rs.25 lakh at the interest of 12.5% for 5-year tenure, you have to pay EMI around Rs.56.245. But if you increase your term up to 15 years, your EMI will be reduced to Rs.30.813.
These EMIs are calculated with the help of a loan against the property EMI calculator that people can access easily.
No tax benefits in LAP loan
You will get many tax benefits by opting for home loans and education loans, but this facility is not provided in LAP loans. As the interest charged on education loan is deducted from the taxed income while in home loan Rs.2.5 lakh interest rate is paid in which Rs.1.5 lakh is repaid to the owner. So choose education and home loans overLAP loans for tax benefits.
The sanction of the LAP loan is held based on the market value of your property. The documentation and other legal processes take time as the lenders verify all the property-related documents. Finally, a technical appraisal is also performed before the approval of your loan. Proof of secured income is also required in this process to get an idea of your repayment capability. All this process takes time of at least 30 days. So if you are in a hurry, then avoid a LAP loan.
Prepayment charges and process
LAP loans contain processing charges as most banks charge 1% of the processing fees of the loan amount. With this, they also charge prepayment penalties and penal interest charges. To get the best loan deals, compare these factors of various loan institutions.
LAP loan is expensive in terms of interest rates, amount of loan, and it also takes time. Therefore, opt for LAP only when you have a lot of time and want to apply for a high loan amount. Before applying for the loan, check the loan against the property documents required and eligibility criteria.
What are you waiting for? Build your dream house with the help of a reliable loan.