Benefits of loan against property you should know

Loan against property or LAP, as widely known, is predominantly a loan that you can avail against your property. You need to keep your home, land, or any piece of your property that is in your ownership. The loan given against property is only a certain percentage of the market value of the property. Usually, banks let you borrow up to 50% to 60% financial aid, depending on the value of your property.

While availing for this loan, your property stays as collateral with the bank, as this is a secured loan. So, in case you fail to repay the loan, the bank or financial institution can auction your property and recover the money you borrowed.

When can you apply for a loan against property?

Unlike other loans, loan against property can be used for other purposes too, including:

• Fund your child’s education abroad
• For funding any medical emergency
• Wedding of your child
• Funding the dream vacation
• Business expansion

What are the benefits of loan against property?

• Lower interest rate:

Since you are keeping your property as collateral against the loan you are availing, the rate of interest generally for this loan ranges between 12% and 15%, unlike other investments that range from 15% - 25%.

• Lower to no prepayment charges:

While repaying this loan, you have the option to opt for full prepayment towards the loan. In loan against property, the lenders generally don’t charge you extra, in case you pay off the rent earlier than the set repayment period.

• Easy to get:

Another benefit of opting for this loan is that it is easy to get. Plus as a loan, loan against property is pretty secured; thus, banks are more willing to offer this loan. This eliminates the probability of your loan being rejected.

• Longer tenure:

Loan against property comes with longer tenure, up to 15 years to be precise. This period allows you more time to repay the loan without having to disturb your other financial commitments.

• Lower EMI:

As compared to other loans, loan against property has low EMI (equated monthly installments). So, even though there is an inverse relationship between tenure and EMI. Which means, longer the tenure lower will be the EMI and vice versa. Since loan against property has lower EMIs that can be paid off in a shorter period.