You may use a Loan Against Property, abbreviated as LAP Loan, for various reasons. A LAP Loan is a highly secured loan with a lump sum amount that you may use to buy a house, commercial estates, or for lease rent centric discounting. The funds from a LAP Loan can be used to establish a business, sponsor educational expenses, or consolidate your debts.
The Eligibility Criteria for a LAP Loan
- An individual who already owns a property
- Salaried individuals
- Self-employed individuals owning any business
Reasons for LAP Loan’s popularity
- LAP Loan interest ratesare much lower compared to personal loans.
- The disbursement procedure of a LAP Loanis much faster compared to a business or personal loan.
- A LAP Loanis much cheaper than a personal loan.
- A LAP Loanenables you to retain your property even after you avail of the loan.
Facts to Know Before Applying for a LAP Loan
Despite numerous advantages of a LAP Loan, the applicants must keep certain things in mind while opting for one.
Repayment of Loan
The applicant should fulfil the specified income criteria since the amount of loan that can be borrowed against your property is quite high. Fulfilling the income requirement is essential for the repayment of the total amount taken as a LAP Loan. A LAP Loan can be repaid over a time of five years up to twenty years. However, the tenure differs from one financial organization to another.
Valuation of Property
A LAP Loan or a loan against property is given against some collateral, that is, an immovable asset like a constructed commercial or a residential property. Before deciding the amount of money taken as a loan and the eligibility to apply for it, the lender concerned will evaluate your property. The amount received as a LAP Loan will depend on the current market value, not the past or future value. Housing finance companies generally offer up to 50 to 60 per cent of the market value of an immovable asset. Hence, you must examine the loan-to-value (LTV) ratio as is provided by the lender.
Lenders approve a LAP Loan if you can convince them that your estate has a fair saleable value. Moreover, the co-owners of the property must also be a part of the loan to meet the eligibility criteria.
Tenure of a LAP Loan
A LAP Loan has a longer period for repayment, unlike a personal loan. You can pay the EMIs over several years, and the LAP Loan interest rate is quite less. A prolonged tenure makes room for low EMIs, which consequently reduces the burden of monthly repayment.
Ability For Repayment
The financial institution will assess your repayment capacity by going through your income documents, pervious repayment records, your current loans etc. Apply for a loan amount that suits your repayment capability to increase the chances of loan approval.
Bonus Point – Checking the Interest Rates
The LAP Loan interest rate will determine whether you can afford to avail of the loan after all. Hence, you must compare and assess the LAP Loan interest rate offered by different lenders. Doing so will enable you to choose the lowest LAP Loan interest rate. It is wise to opt for prepayment conditions that are flexible since it makes the repayment procedure hassle-free.
You must enquire about the services of the lender so that you have a favourable borrowing experience. These services comprise aid on behalf of your lender to help you find the suitable property, sound advice on technicalities related to property purchase, etc. If these factors are met, you can stay assured that you have found the perfect LAP Loan to fulfil the needs that you can use in the right way.