There’s a better option for financing your property, which could also help you meet some financial goals — a LAP loan (Loan Against Property). This allows you to access funds quickly using collateral from your own land, thereby making it less costly in terms of interest when compared with other types of loans.
These serve as a security using property and are highly relevant in a densely populated country such as India. So, without wasting much time, let’s find out what makes taking a LAP loan for property financing a good idea.
What does LAP Stand For?
It is a type of secured loan where you offer your house or even office building as security in return for a defined amount of money borrowed from any lender. Normally, the lending amount may go up to 60% to 80% of the home’s market value.
Key Features of LAP Loans
#1. Lower Interest Rates
Since your home backs up these loans, the interest rates tend to be lower than those charged by banks on unsecured debts like credit card debts or personal money lending arrangements.
#2. Fast Loan Disbursement
Compared to unsecured loans, you can receive a stakeholder as quickly as possible.
#3. Monetary Crunch
A LAP loan caters to huge sums needed for several bills. Given that the property secures the money, you are likely to borrow more from the same lenders.
#4. Utilization
Home renovation, schooling fees for the children, and health expenses during emergencies can be undertaken using the proceeds from this facility. This makes these loans highly versatile in financial terms.
Why Choose a LAP Loan
Higher loan amounts are available through LAP loans and they provide good opportunities for one to start new businesses in terms of investment dollars.
Another important reason for their popularity is that LAP loans offer quicker approval periods than any other type of loan. When property is used as collateral, the application process requires minimal paperwork before approval.
Tax Benefits and Other Financial Outcomes
Though LAP and home loans are not the same, one can still enjoy some advantages on top of financial efficiency. One could claim interest deductions paid under section 24(b) of the Income Tax Act of India, provided one uses a home loan for renovations.
A tax saving calculator will help you estimate the potential savings on your LAP loan interest payments that can be used as a budget planning tool. It is important to remember the following issues before applying for this type of secured borrowing:
#1. Risk of Property Loss
Failure to repay the loan might lead to the bank foreclosing against your home, hence losing ownership. Therefore, proper assessment of one’s repayment capability is vital.
#2. Loan-to-Value Ratio
The LTV measure indicates how much money equivalent to the value of the mortgaged property would be lent by banks or other lending institutions compared with its overall valuation. Depending on the location of the property, nature, and age, the property may range from 60% to 70%.
What Are The Eligibility Criteria?
An individual’s creditworthiness depends on their salary, credit history, and property value among others. Usually, a good credit score (750+) is necessary alongside permanent income for those who wish to secure better lending terms.
How About Processing Fees and Other Charges?
Fees like processing fees, legal valuation, etc. should not be ignored when considering loans because they collect up and can alter your decision on them.
The How-To’s of Getting a LAP Loan
Applying for a loan against property is relatively simple in India. The process starts with:
- Before you even consider applying, check eligibility first. Online eligibility tools can help.
- You can always visit a lender’s webpage to read what they need you to get a loan.
- Once you submit your application and it goes through, refrain from delaying receipt of loan offers since this should be done as soon as possible.
The Bottom Line
For those who want to finance their properties, a LAP loan could offer them several advantages, such as flexibility, lower interest rates, and quicker approval processes than unsecured loans. Nevertheless, caution is needed before taking such an action as it may expose your property.
Innovative planning and expert advice are required if a LAP loan is to open new opportunities in home repair or business funding. You will first need to know how much you are supposed to pay upfront or every month as interest on your LAP loan (a tax saving calculator can also help you in this regard). Spare some time researching these lenders and comparing them to secure the best loan package according to your needs.
