One of the finest modes of financing that is gaining a lot of popularity is the loan against property. The loan against property (LAP) is the kind of loan that keeps the applicant’s property in the mortgage. A certain percentage is determined based on the price of the property for availing this kind of loan. Many people have availed this type of loan and have used the money for various uses.
The various benefits of having a LAP are as follows:
Lower interest rates
As compared to a personal loan, the interest rates offered for a loan against property is lower. That is because the property of the applicant is kept as collateral. The base of the loan is generally set up to 12% to 15%. However, in cases of personal loan, the interest rate is set between 15% to 25%. With this being said, a lot of people have availed the LAP loan as they can easily pay back the loan easily. It is to be noted here that this kind of loan provides a lot of flexibility too. The approval procedure for this kind of loan is also very simple, and it gets easily approved when a property is kept in the mortgage.
Flexible repayment tenure
The loan against property comes in highly flexible tenure ranging between 10 to 15 years, or in some cases even 20. The borrower in this regard has a lot of time to repay the amount to the bank. That way, all sorts of financial burden can be reduced and no other financial burden can get anywhere close to the borrower. The borrower also gets the chance to repay the debt with monthly instalments. Those having a decent amount of income can easily repay the money in a few years time and there will be no looking back for them. The overdraft limit is determined by the borrower’s monthly income and the value of the property.
Continuous ownership of the property
Under the LAP agreement, the owner of the property continues to remain the owner. Thus, if in case the borrower is unable to repay the loan money, then they can sell the property and repay the money to the bank. The borrower can also decide to sell their property early to repay the loan money. The LAP also comes with an option to prepay the amount of loan money without giving any kind of penalties. This further means that the overall interest burden can also be relieved from the borrower.
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It is only because these loans are secured, the approval procedure is fairly simple. Like it has been mentioned above, the banks approve these loans and let the borrower decide what they are going to do with the money. As opposed to unsecured business loans, these loans do not have any kind of risk factors. However, the screening procedure is a little time-consuming. Those in need of money must know the conditions for availing such a loan. It is for the best interests of the customers, the bank as well as of the economy.