The unprecedented COVID-19 pandemic has induced financial instability due to which businesses and individuals have been compelled to take desperate financial measures to meet their financial requirements. It has also put many people in debt traps.
However, in these difficult times, salaried individuals and business owners have been availing secured loans to meet crucial needs like medical emergencies, children’s higher education, wedding, and urgent business investment.
A long against property is a secured loan provided by both banks and non-banking financial companies. Both salaried and self-employed individuals with a preowned property can opt for a loan against the property. The reason more people are applying for LAP loans is that the interest rate is lower than other personal loans.
It may be convenient for the existing customers of the lender to avail of a loan against property, new customers will have to provide the required documents, meet the eligibility criteria, show good credit history, repayment capacity, and the value of the property to be mortgaged.
Features of a loan against property
- Loan against property is a secured and convenient mode of finance used by both individuals and businesses.
- You can get instant funds by mortgaging your residential or commercial property.
- You can get a loan equivalent to a certain percentage of the property’s insured declared value.
- You can opt for an EMI based on your requirements by using a loan against property calculator on the lender’s website.
- Loan against property interest rates is among the most attractive in the loan market.
Why opt for a loan against property?
- Multiple purposes
A loan against property serves multiple purposes. It can be used by individuals to address crucial life goals such as higher education, marriage, or making a down payment for a home or car. You can also use it as a home renovation loan to repair damages.
Furthermore, businesses can use it to avail funds for business expansion, research, and development, product development, marketing, promotion, etc. Businesses can get loans against property to bridge gaps in cash flow and fund new requirements.
Benefits of a loan against property
Several benefits come with a lap loan. Here are some of the benefits you can avail yourself of while applying for a loan against a property.
- Competitive Interest rates
A loan against property is a secured loan as the property is pledged as a mortgage. Since the lender is ensured of payment, the interest rates are comparatively lower. A lower interest rate results in lower EMIs, making it easy for the borrower to address other financial requirements without compromising his budget.
- Flexible repayment tenure
The repayment tenure for a loan against property is long. It there reduces the equated monthly instalment amount, which makes repayment easy and affordable.
- Continuous ownership of the property
The best part about a loan against property is that you can get a loan against your commercial or residential property and continue to own and use the property as you please. However, you must make your EMI payments on time to avoid legal hassles in the future. Your lender has the legal right to auction the property to recover the loan amount if you default on EMI.
- Eligibility criteria
The eligibility criteria slightly differ for individuals and businesses. For salaried individuals, there is a certain annual income that they need to show to get a loan against property. There is also a certain age at the time of application and the end of the loan tenure.
As with business, there has to be a certain turnover for availing a loan against property. Most lenders spell out their eligibility criteria on their web portals.
Although the list of documents required varies across lenders, the most common documents required for loan against property are
- PAN Card
- Identity Proof
- Address Proof
- Business continuity proof
- Passport-sized photograph
Salaried individuals need to produce:
- Income tax returns (previous two years)
- Salary slips or the form 16 from the employer
- Bank statement (previous 3 months)
Businesses need to produce
- Audited Income Tax Return financials
- Bank statements (main account with other accounts mentioned in the balance sheet)
- Partnership agreement and partnership authority letter (if applicable)
- Shareholding patterns (in case of a private and public company)
A loan against property is the best way to meet your individual and business financial needs because there are lower interest rates and longer repayment tenure compared to other personal loans.