LAP can be taken for funding various purposes, from business-related purposes, medical emergencies, to fund a child’s education, weddings or any other personal needs.
You can also borrow large sums of money through a loan against property (LAP). Loan against property (LAP) is a secured loan taken for funding various purposes. From business-related purposes, medical emergencies, to fund a child’s education, weddings or any other personal needs. Various banks offer loan against properties, under which a relatively larger sum of money is offered when a property is used as collateral, than in other types of loans. However, the amount of loan that the banks offer is generally up to a certain amount that the EMI you pay does not exceed 60 per cent of the monthly payment you receive in hand.
Keep these things in mind if you are also planning to take a loan against your property:
1. Before approving a loan, banks check records such as payment-track records and repayment ability of the individual. If you have other loans or existing liabilities, your eligibility for another loan goes down further. Some banks also take into consideration the number of dependents in an individual’s family, as more dependents are considered as lower repayment capacity.
2. As these loans are of higher amount and take long tenure, hence, compare the lenders before making the decision of choosing the right lender for your LAP. Experts suggests one should not limit their research to just the interest rates offered, while comparing various lenders. Other parameters such as prepayment charges, foreclosure charges, processing fee, late payment penalty and loan to value ratio should be considered
3. Experts suggest, one should avoid over-leveraging as it can result in a loan default and you could end up losing the property against which you have taken the loan. If the property being offered as collateral is disputed, their are chances that your loan request could also be turned down.
4. Sometimes banks do not approve a loan request if the property taken as collateral is under dispute or the property papers are not clear about ownership. These loans are available for longer tenures of up to 15 years and with speedy approvals, flexible repayment options, the documentation for a loan against property is relatively easy.
5. Loan to value (LTV) ratio is normally restricted to 50-60 per cent of the property’s market value. The loan can vary from Rs 5 lakh to Rs 500 crore, and the tenure can go up to 20 years.
6. LAP does not provide any tax benefit, unlike home loans that provide a tax benefit of up to Rs 2,00,000 per year on interest repayment and Rs 150,000 on principal repayment.