Asset mortgaging is one of the greatest ways to raise funds to your needs. Be it business needs or personal needs, LAP would be the right choice when there is a possibility. These loans do not allow you to hold the possession of the property even after pledging them. As these loans are secured in nature, the interest rate on the loan is comparatively low. You can pledge anything like residential property, commercial property or a piece of land. The best part of LAP is there is no restriction on the end use of the loan proceeds. LAP loans also provide overdraft facility apart from regular EMI which owner can withdraw the amount according to fluctuating capital requirements. Some key factors should be taken into account while evaluating LAPs as an option.
Loan against Property Checklist
The interest rate on LAP is the most important factor that should be taken into consideration while choosing one. The rate of interest on these loans generally ranges from 10-14%. You should also evaluate for the reason which you are taking the loan. If your purpose of taking the loan is constructing a home, renovation of a home or for education, choosing the loan that is designed for the purpose turns out to be cheaper. If you are not eligible for other loans LAP should be the option.
Amount of loan
With the recent surge in LAP, banks are at a pressure in sanction the same. The loan amount you get through the pledged property amounts to 60-65% of market value of the property. If you are looking for the higher loan amount, you should pledge the property with high market value. Choosing to go by LAP for small loan amount does not make sense as you are pledging your property.
The loan tenure of Loan against property is as long as 15 years there by giving an edge over short tenure loans like personal loans and car loans. Longer loan tenure translates to lower EMI. You can comfortably repay the EMI without risking your finances. When you choose low EMI, there is no risk of defaulting loan less are the chances of loosing pledged property.
No tax benefits
Unlike education loan and home loan, you will not be eligible to any tax benefit when you consider taking a mortgage loan. If you are thinking to avail loan against a property to address home purchase needs or higher education of the children, this aspect should be given due consideration.
Long processing time
As the name suggests, these mortgage loans are backed by property you pledge. The lender has to conduct a technical appraisal of the property before the loan is disbursed. The lender also checks your repayment capacity before the loan is granted and all this process needs little longer time than normal loans.