India's mortgage market continues to grow at a robust pace, and so does the demand for Loan Against Property (LAP). According to rating agency CRISIL, LAP is expected to grow at 22% annually over the next four years and double to almost Rs 5 lakh crore by 2019.
This growth rate clearly indicates rising popularity of such loans in India, especially among self-employed professionals. One of the key reasons for LAP's success is that its average ticket size is much higher than home loans and it can be used to fund any requirement. Approvals are quick, and the application process is quite simple/ hasslefree and the interest rate charged is also reasonable.
To know more about Loans Against Property, and their various facets continue to read further!
What is a Loan Against Property (LAP)?
LAP is the same as its name implies - A loan given against the security of one's property. LAP is designed to meet the financial needs of an individual already owning a house or any other real estate based asset. It is usually taken to support business purposes, such as expansions, consolidations, diversifications and more.
Why Should You Choose LAP?
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The biggest advantage of LAP is that it is cheaper in comparison to other loans provided by NBFCs, Financial Institutions or Banks. The interest rate at which LAP is issued is usually between 10-13% per annum. This is because the lending entity has security in the form of real estate based collateral or mortgage.
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The tenure for a LAP loan is much longer than that of personal loans, with a range of anywhere between 1-15 years.
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The time taken to process these loans is very less as compared to other loans. All you need is to keep all the documents ready.
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At times, monthly installments of LAP have turned out to be cheaper than personal loans as the rate of interest is much lower.
For What Purpose Should One Seek Loan Against Property (LAP) Based Funding?
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Expanding one's business
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Purchasing plant or machinery for business or industrial purpose
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Acquisiring another company
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Project financing
Features of Loan Against Property
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It can be used to fulfill almost any business need
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High loan amount, up to 75% of the property value
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Easy repayment options
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Low and attractive interest rates
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Easy processing and minimal documentation
Points to Consider before Applying for Loan Against Property
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Fixed vs. floating interest rate
Fixed interest rate results in constant EMIs during the loan tenure. On the contrary, a floating interest rate implies that the EMI would fluctuate (increase or decrease) as per changes in interest rate.
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Fair property value
It is the estimated current value at which the property in question can be sold or bought today. The loan amount sanctioned is dependent upon the value of the property.
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Income and repayment ability
Even though the loan tenure is long, it is the borrower's duty to ensure that she/he repays the loan on time, or else it may lead to a loss of ownership of the pledged property asset.
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Ownership and title clearance
It is mandatory that the property is in the name of the loan applicant(s). Any title mismatch must be cleared beforehand, or it might lead to rejection of your loan application.
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Partnership business
It is not in anyone's good interest to avail loans for partnership business as the chances of conflicts arising between the partners are high. These conflicts usually end up in non-repayment of loans and loss of the property pledged as security.
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Processing fee
The processing fee is usually very low. Most lenders usually charge around 1% of the loan amount sanctioned.
The Types of Properties That Can Be Mortgaged:
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Residential Properties
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Commercial Properties
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Alternate Properties, example: Farm House, Industrial Unit, School, Guest House, Hotel, Hospital, etc.
*These can either be self-occupied or rented provided the applicant of the loan must own all these.
Loan Application Process
Salaried or self-employed persons, with a good credit history, can avail LAP, and keeping in mind the long tenure, low EMIs and the minimal documentation needed to apply for such loan, It can be said that LAP is one of the economical and best ways to get some quick funds on hand. Making LAP a great tool for fulfilling your dreams.
