For someone who is in need of financial help, the market provides a wide range of options. One of the best modes of financing and that is rapidly gaining popularity is Loan Against Property or LAP.
Just as the name suggests, the loan against property is a secured loan that is given by mortgaging a self-owned property (residential or commercial) with the lender. The loan is not only restricted for the salaried, but also for self-employed professionals and businessmen.
Loans against property are very easy to get as they have very simple and minimal documentation requirements and quick disbursements when compared to other loans.
They process is as follows:
Eligibility: The property value along with income decides the eligible loan amount. Also, the age and the past credit history of the borrower will impact the loan amount and EMI process.
Documentation: The application form and proofs of identity, address, and income, the ownership documents along a property valuation report needs to be submitted.
Processing: All the information will be verified, and when satisfactory results are meet then the lender will process the application. There will be a field visit done to assess the property.
Costs: Depends on the lender’s said processing fee, mortgage stamp duty, and other charges.
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Disbursement: The disbursement of the loan will be done soon after completing all the formalities. The loan can be disbursed in 2 and 3 installments, and this completely depends on the quantum of the loan.
Benefits of a Loan against property
1. Quantum Loans: Loans against property give higher funds that can help one take care of all their financial needs, and this is one of the biggest advantages for a middle-class individual with financial issues.
2. Loan tenures: The maximum repayment tenure is 15 years. At times there are prepayment charges in case partial or full depending on the type of interest rate chosen and in the case of the commercial refinance.
3. Lower rate of interest: These loans come with a lower rate of interest in comparison to unsecured loans. A good credit score and credit history will always get a loan with a low rate of interest.
4. Top-up facility: There are some financial institutes that offer top-up loan benefits for the loan against property. Thus, making it more flexible and helping to handle more financial needs.
5. Retain the ownership of the property: The borrower can retain the ownership of the property. The ownership of the property does not change by keeping the property as collateral for a loan. Also, the property can be sold in case the repayments cannot be made.
6. Availability of pre-closure option: Loans against property can be pre-closed without paying any penalties if the loan has variable interest rates. However, you need to pay a nominal amount if your loan is at a fixed interest rate.
7. Loan transfer: Just in case one gets better loan terms, there is, there is an option of transferring the existing loan to the new lender. However, this process involves prepayment of the already existing loan and applying for a new loan with a new lender.
8. The lender doesn't hold any kind of restrictions on using the provided amount. It can be used for various purposes.
The disadvantage of loans against property
1. Property can be sold : If the borrower defaults on payments, the property can get sold. At times, when the borrower cannot repay the loan in full, the lender has the right to sell the property to settle the loan amount.
2. Value of property: The borrower receives only 60% to 70% of the property’s market value.
3. Unstable prices: With the economy constantly fluctuating, the price of the property can rise or dip at any time. This can prove as uncertain to the borrower as a lesser loan amount may be granted.
Having said all the above, while choosing an ideal lender, make sure the application process is easy, the eligible loan amount is good, the costs, the ease of transacting, and repayment options are beneficial.
Along these lines, a recommendation would be Aaegy.com. It is the first digital lending aggregator platform to offer the best debt solutions across Private Banks, PSBS, Cooperative banks, and NBFCS. They make the entire process of financial assistance simple and hassle-free through an automated assessment engine with personalized financial advice. Aagey.com partners with the industry’s leading financial institutions and has lenders who provide the best loans against property. Get in touch today for better solutions.