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Top Features of a Loan Against Property

Investing in properties has always been a good choice. Not only does the investment grow, but you can also avail of a loan against your commercial or residential property, especially if you are in a situation where you need to raise money in a short span of time. Further, mortgaging a property provides security for the loan. Thus, lenders readily agree to approve loans against property on favourable conditions. Additionally, compared with other loans, secured loans are offered at a lower interest rate by lending institutions. Over the last few years, the demand of loans against property has only increased. Multiple reasons have contributed to the increasing popularity of loans against property. In 2022, loans against property comes loaded with features. If you are looking to avail of a property loan, you must know about these top features of a loan against property.

Here are Features of a Loan Against Property to Consider:

Hassle-free Loan Approval

Although property loan applicants are required to fulfil the eligibility criteria related to age, income and residential status, compared with other loans, it is relatively easier to secure a loan against property. Being a secured loan, individuals pledge property as security for the loan. The attached collateral reduces the apprehension of lenders related to the repayment of the loan. Therefore, loans against property or lap loan applications are approved without much delay when you have the required property documents to prove legal ownership. 

Unrestricted Usage

Depending on the needs of a borrower, the LAP loan or loans against property amount can be used without any restriction, which is also a key feature of this financial product. The absence of restrictions allows LAP loan borrowers to use the amount for several personal purposes, such as to fund a child’s wedding, for business expansion, to fund vacation plans, plan home renovation, and so on. 

Lucrative Interest Rates

Interest rates are charged on a higher rate on loans that are unsecured. Considering the involvement of collateral against the loan, banks generally charge a lower interest rate on loans against property. Other than a home loan, LAP interest rates are lower than the interest rate on all the other loans. Moreover, in recent years, loan against property interest rates have been at their lowest. In 2022, borrowers can take the benefit of this opportunity. Another way to receive a lucrative loan against property interest rate is to maintain a good credit history. With some negotiation, individuals can grab exciting LAP interest rates if they have a credit score of more than 750. 

Flexible Loan Repayment Tenor

Generally, lenders offer LAP loans for up to 15 years. For the repayment of loan against property, individuals can opt for flexible loan repayment tenors. The availability of flexible tenors makes LAP loan a wise financial decision. By availing of a suitable repayment tenor, borrowers can avoid the burden of paying a higher EMI. Further, one can use a LAP EMI calculator to choose an affordable EMI. For checking the effect of a longer or shorter repayment tenor on the loan, lap EMI calculators can be of great help.

Option of Loan Pre-closure

During repayment years, as per the feasibility and convenience of the borrower a loan against property can be closed by paying the outstanding amount in entirety. Your lender, however, may impose some charges on you for processing the pre-closure of the loan. Therefore, it is advisable that you discuss this in advance with your lender. Also, you must perform required calculations to see whether pre-closure of the loan is a financially prudent decision to make or not.  

Best Possible Property Usage

For availing of a loans against property, it is mandatory to offer the property as collateral. However, the ownership of the property does not change during the period of the loan and thus, property owners must continue to occupy or use the property. So, owners can always rent their property out and earn extra income using the property on which loan has been availed of. Following this approach, a property can be put to its best or optimal usage.

Income Tax Benefit

Another significant advantage of a loans against property for borrowers is the income tax benefit. However, tax benefit can only be claimed if the loan amount is spent for specified purposes. For instance, if salaried employees use the LAP loan money for constructing or buying a house, they can claim income tax benefits under Section 24 of Income Tax Act. Tax benefit can also be received under Section 37, for loans against property money spent as business expenditure.

A loans against property comes loaded with benefits. However, for getting the loan sanctioned, prospective borrowers must show to the lender that they are low-risk borrowers. This can be done by developing a steady income source, avoiding frequent job changes, maintaining a good credit history, doing higher down payment, and so on. As a borrower, you must also ensure that LAP loan EMI is paid on time. Continuously defaulting during loan repayment can even result in property being seized by the lender. With right information, you can easily avail of a loans against property to fund your expenses and enjoy its best features.

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