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Looking for larger funding? A LAP can be your Ideal Choice

Updated: Oct 13, 2021
Know the Basic Idea of Loan Against Property (Beginners Guide)

Nowadays, personal loans are a preferred option for users to meet their immediate financial needs. But it can only be used when the requirement is small. For a larger amount, it becomes difficult to get a personal loan with favourable terms and easy repayment options.

Therefore, in such a case, a loan against property is the most suitable option for you. The loans offered under the loan against property category come with attractive terms like low-interest rates, easy repayment options, longer tenures, and flexibility in the usage of the loan amount.

Let’s discuss the loan against property and some factors related to it in detail.

What is Loan Against Property?

A loan against property or LAP is a type of secured loan, in which the loan is sanctioned against your asset, which is kept as collateral with the lender. In the meantime, the borrower can continue using the property. However, the deeds to ownership of the same will remain with the lender until the loan and all other dues are completely paid up. The asset pledged under LAP should be immovable like residential or commercial properties.

A Loan against Property shares a few similarities with a personal loan wherein there is no end-usage restriction on the loan amount and it comes with flexible repayment tenure options.

As the loan under LAP is secured against an asset, the loan is offered with a lower interest rate and has a longer repayment tenure compared to a personal loan.

Loan Against Property Usage

A loan against property can be used for various purposes including personal as well as business. It can be used for meeting all the big-ticket expenses like meeting a child’s higher education expenses, wedding expenses, medical expenses, home renovation expenses, financing the purchase of plant & machinery for business, purchasing raw material and meeting working capital expenses.

Advantages of Loan Against Property

1. Higher Loan Amount: Through a loan against property loan type, you may be able to get a higher value loan amount as compared to that obtained through an unsecured loan. Most lenders approve a loan amount ranging between 75-90% of the collateral’s fair market value.

However, the final loan amount offered will depend on various factors including the nature and value of the property, the repayment capacity of the borrower, and so on.

2. Enjoy lower interest rates: As loans are secured against an immovable property, which reduces the risk for lenders, borrowers can get lower interest rates on the loan as compared to unsecured loans. In most cases, the LAP interest rate is lower than personal loan interest rates.

3. Longer repayment tenure: Compared to a personal loan, which has a maximum tenure of 5 years, the loan against property has a maximum repayment tenure of up to 15 years. It makes it easier to plan the repayments and longer repayment tenure also helps to lower the EMIs.

Using an EMI calculator, you can easily calculate the loan EMI for different loan tenure

4. Part-payments: Most personal loan lenders do not accept part-payments, and may charge foreclosure fees in case a borrower wishes to pay off the loan before the end of the tenure. However, for LAP taken on floating rates for non-business purposes, borrowers can choose to make part-payments free of cost if they come across any extra income such as annual bonus at work.

Things to Remember Before Taking a Loan Against Property

Before applying for a loan against property, you must look after the following things:

1. Property valuation: The valuation of the property for loan against property is assessed by the lender. Mostly, the properties are valued at the prevailing fair market price, against which the loan amount is determined. Therefore, before going for LAP, understand the property valuation process of the lender.

2. Property ownership: The property should have a clear record and should not be involved in any litigation. It should have a clear marketable title and valid title deeds. If the property is jointly held, the loan should be applied along with the joint holder of the property.

3. Check eligibility: Always check the eligibility criteria and ensure that you meet them so that your application gets accepted. Also check and understand the loan against property interest rates offered by the lender before applying.

4. Repayment Capacity: Borrow the sum that you will be able to repay without affecting your finances much. Before applying for LAP, evaluate your finances and future obligation to understand your repayment capacity and your monthly EMI amount.

5. Documentation: In LAP, pay attention to the documentation process and terms of the lender. Before signing up the loan document, perform due diligence of the loan agreement document, charges, penalties in case of a late payment, etc. Also, check which property documents will be required by the lender for LAP.

For borrowers facing a cash crunch, LAP is an ideal financing option for securing larger funding. It helps you to leverage your asset for meeting all the financing needs.

To apply for a loan against property with Grihashakti, click on the “Apply now” button and begin your journey today.

Must Read : Know the Basic Idea of Loan Against Property (Beginners Guide)

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
CIN number: U65922TN2010PLC076972

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