Meet your immediate financial need with a loan on property

Property has always been the most favored form of investment for the capital appreciation it offers as well as for its ability to be pledged as collateral in times of financial need. For the property owner having flat in any part of the country, loan against real estate is often the most convenient type of loan available in the market. Although there are various routes of availing cash such as a personal loan, a loan against property (LAP) is probably the best option for most people.

What is a LAP?

A loan against property (LAP) allows you to leverage your realty assets to gain funds in an urgent situation. A LAP gives the borrower access to a secured loan with a lower rate of interest and a longer repayment period. It can be used for a number of purposes from personal – marriage, sickness to commercial reasons such as investment in business, office expansion etc.

When you apply for a LAP you can get upto 70% of the value of the property or twice your annual income (whichever is lower) as a loan against your immovable property. It is available for a period of 1 year to 15 years and the rate of interest will be in the range of 12 – 16% p.a.

Alternatives to LAP

Personal Loan

Although emergency funds can be arranged through various routes such as a personal loan, a loan against property has lower interest rates and is easier to access than a personal loan.

Loan from family and friends

Another option is borrowing from family or friends but when the amount is large, people can be hesitant to help, or may not be able to procure the funds immediately to help you.

 Benefits of LAP

Lower Interest Rate

Currently the prevailing rate for personal loan varies from 14% to as high as 48% p.a whereas the rate of interest on LAP varies from 12 – 16% making a LAP far cheaper than a personal loan.

Longer Tenure

For a personal loan the maximum tenure is 5 years whereas for a LAP the tenure can extend up to 15 years.

Minimal documentation

Being a secured loan, a LAP has comparatively faster approvals with minimal documentation required.

Option to top-up loan

If the value of the property has risen during the tenure of the loan, the owners also have the option to avail a top-up on their existing loan. This is especially useful for the self -employed and entrepreneurs.

Reverse mortgage option available for senior citizens

Senior citizens can avail a reverse mortgage against their homes, through which they can get a loan, released in monthly or quarterly installments or as a lump sum payment immediately  against the security of the house they own and live in, thus ensuring them financial freedom in their retirement years.

Applying for a LAP                                                   

Any type of freehold  Loan on Property for apartments in any part of country , irrespective of whether it is rented out to a third party or self-occupied by the applicant,  is eligible for LAP. The only consideration is that the title of the property should be clear without any encumbrances.

In case of joint ownership of a property, all the co-owners should also be co-applicants on the LAP, to assure the bank that all owners are in agreement with offering the property as security for the loan.

The bank will then request for all the documents related to the title of the property, along with identity proof, address proof and income proof to be submitted to them.

The next step for the bank would be to check your repayment track record and your credit history through the Credit Information Bureau India Ltd (CIBIL). Once the bank is satisfied with your financial records, it will sanction the loan, which will typically range from 40-70% of the value of the property.

A LAP is one of the best ways to raise money in an urgent situation when large funds are needed. However the borrower must keep his repaying capabilities in mind as the bank can take complete possession of your mortgaged property if you fail to make your payments.

Source: http://loan-against-property-india.weebly.com/blog/meet-your-immediate-financial-need-with-a-loan-on-property