When you need money, you can get a loan from a bank or a company by giving them your property as a guarantee.We refer to this as a loan against property (LAP). You can use the money for anything you want, like fixing your house, studying, getting married, or investing. In this article, we will tell you four reasons why a loan against property is a good option and how it can help you.
1. High Loan Amount
One of the main advantages of a loan against property is that you can get a high loan amount based on the market value of your property. Generally, lenders offer up to 65% to 70% of the property value as a loan12. This means that if your property is worth Rs. 1 crore, you can get a loan of up to Rs. 65 lakhs to Rs. 70 lakhs. This can help you meet your large financial needs without compromising your savings or other assets.
2. Low Interest Rate
Another benefit of a loan against property is that it comes with a lower interest rate than other unsecured loans, such as personal loans or credit cards. The interest rate of a loan against property depends on various factors, such as your income, credit score, property type, loan tenure, etc. However, it is usually in the range of 8.50% to 16.25% per annum12. This is much lower than the interest rate of a personal loan, which can be as high as 24% per annum. A lower interest rate means that you can save money on the interest cost and repay the loan easily.
3. Long Repayment Tenure
A loan against property also offers a long repayment tenure, which can extend up to 20 years12. This gives you the flexibility to choose a tenure that suits your repayment capacity and cash flow. A longer tenure also reduces your monthly instalment amount, making it more affordable and manageable. However, you should also keep in mind that a longer tenure increases the total interest cost, so you should strike a balance between the tenure and the EMI.
4. Flexible Usage
A loan against property can be used for any legal purpose, as long as you can repay it on time. You can use the loan amount for personal needs, such as home improvement, education, wedding, travel, medical emergency, etc. You can also use the loan amount for business needs, such as expansion, working capital, machinery purchase, etc. Unlike some other loans, such as home loans or car loans, which are restricted to a specific purpose, a loan against property gives you the freedom to use the money as per your requirement and convenience.
Conclusion
A loan against property is a convenient and cost-effective way to borrow money by leveraging your property. It offers you a high loan amount, a low interest rate, a long repayment tenure, and a flexible usage. However, before you apply for a loan against property, you should also consider the risks involved, such as losing your property in case of default, paying a higher processing fee, and facing a longer approval process. You should also compare the loan offers from different lenders and choose the one that best suits your needs and preferences.
FAQs
Q.1 What are the advantages of a loan against property?
Loan against property offers you a high loan amount, a low interest rate, a long repayment tenure, and a flexible usage. You can use the loan to meet your large financial needs without compromising your savings or other assets.
Q.2 How much loan can I get against my property?
The loan amount depends on the market value of your property and your repayment capacity. Generally, lenders offer up to 65% to 70% of the property value as a loan.
Q.3 What is the rate of interest on a loan against property?
The interest rate for a loan against property varies from lender to lender and depends on various factors, such as your income, credit score, property type, loan tenure, etc. However, it is usually in the range of 8.50% to 16.25% per annum, which is lower than the interest rate of unsecured loans.
Q.4 What is the total repayment tenure for a loan against property?
The repayment tenure for a loan against property can extend up to 20 years, subject to the condition that it does not exceed your retirement age. You can choose a tenure that suits your repayment capacity and cash flow.