Loan seekers can choose between multiple credit options. Whether it's a secured or unsecured loan, people can pick anything as per their preference. Furthermore, opting for a loan against property is a great option if a person can't get any other loan.
But what is a loan against property? It's something completely different from a personal, car, or housing loan. Let's dive into this blog to understand what a loan against property is and its benefits.
Loan Against Property (LAP)
A loan against property is a secured loan. It is useful for self-employed as well as salaried individuals. To avail this loan, you will have to mortgage a commercial or residential property.
The lender will approve the credit amount as per the present value of the property. A borrower can mortgage a self-occupied property or any other piece of land owned by them. But the borrower must be clear about the title of the property before applying for a loan against it.
Purposes of a Loan Against Property
The different purposes behind applying for a loan against property are as follows:● Paying for higher education ● Home Renovation ● Down payment for constructing or purchasing a new property ● Bearing medical expenses ● Purchase of high-end business equipment ● Restocking inventory ● Paying for a wedding ● Debt consolidation
Benefits of a Loan Against Property
Some benefits of a loan against property include the following:● Different Property Options
If you want to apply for a loan against property, then you can use different properties as collateral. It can be self-occupied land or residential property. You can also keep the commercial property as collateral. The borrower can still hold the ownership of the property and use it while receiving funds against it.● Competitive Interest Rates
A loan against property tends to come with low-interest rates. Therefore, borrowers need to pay lower EMIs. It ensures that the overall financial burden is low on borrowers.● Flexible Loan Amount
As a loan against property is a secured loan, borrowers can gain a higher amount than any unsecured credit option like a personal loan. The exact amount you will get depends on the price of the property in the present market.● Longer Loan Tenure
A loan against a property usually comes with flexible repayment terms. In the case of a personal loan, the tenure can usually go up to 5 to 7 years. But a loan against property has a long tenure of up to 15 years. It lowers the financial burden on the borrower.● Tax Deductions
As per Section 31 of the Income Tax Act, a loan against property offers tax benefits on the interest rate. Section 24 of the Income Tax Act mentions that a tax deduction of Rs. 2 Lakhs can be availed on loan against property taken for building a new house.
A loan against property in India is beneficial for businesses as well as individuals. It is an extremely convenient option to get a higher loan amount with low-interest rates and flexible repayment terms. Borrowers can receive funds against a property without losing its ownership.