You might have a wish to start your own business or fund your child’s higher education abroad. The reasons for which borrowers might need financial assistance are endless. However, not everyone has the savings needed for these expenses. In such cases, one can apply for loan against property (LAP) to arrange the required funds. Now, this is a secured loan, which means that the borrower has to pledge their property as collateral in order to get the loan.
Now, why should borrowers go for a loan against property instead of going for an unsecured loan such as a personal loan? Is taking this loan a good idea? Let’s take a look at a few advantages that borrowers enjoy through an LAP to get answers to the previous questions:
- You can get a high loan amount
The loan amount that lenders can offer for an LAP depends on the value of your property. You can find financial institutions that offer up to 80% of the property value, which can be quite a high loan amount. This is significantly higher than the loan amount that lenders offer for an unsecured loan.
- The mortgaged property can still be used
One major advantage of applying for a loan against property is that you do not lose ownership of the property pledged as collateral. So, borrowers do not have to worry about whether they can use the property or not. One can continue to use a property that is mortgaged for a loan. You can mortgage different types of properties; not just residential property, but also commercial properties such as malls, office buildings, complexes, shops, and so on.
- Lenders offer long repayment tenures for an LAP
Financial institutions offer a repayment tenure of up to 5 years when it comes to personal loans. However, with a loan against property, a borrower can get a repayment tenure of up to 15 years. This difference in the tenures is quite a lot and can make repaying the monthly instalments of an LAP much easier.
- Borrowers enjoy a low interest rate by taking an LAP
This will answer the question as to why borrowers can benefit more from taking a loan against property as compared to an unsecured loan. With an unsecured loan, the lender is at risk since there is no collateral involved. This is why the interest rates for these loans are usually higher. Since an LAP is a secured loan, lenders can offer a lower loan against property interest rate.
Therefore, these are key advantages of applying for a loan against property. Experts advise borrowers to first make use of a loan against property EMI calculator, as it will help in displaying the loan’s EMIs. You can then decide whether to go ahead with the loan or look for a better loan plan. In addition, to avoid any complications, speak with the lender and inquire about the documents required for loan against property.