A Loan Against Property (LAP) is a smart way to use your real estate as a collateral to secure funds. The purpose of this type of loan is to give you credit access by pledging your property to a financial institution. The key advantage is that LAP generally offers lower interest rates compared to unsecured loans, thanks to the Financial property serving as security. With various LAP options available, you can choose the one that best fits your needs.
oan Against Property (LAP) comes with several advantages
Low Interest Rates
When you use your property as a guarantee, the interest you pay on the loan is usually lower in comparison to other loans.
No Big Charges for Early Payment
If you want to pay-off your LAP early, it won’t cost you a lot. While paying off other types of loans might come at an additional charge, there are no charges involved in paying off LAP.
Easy Loan Approval
NBFCs or banks are happy to give approval for LAP as it’s a safe bet for them. So, it’s not too hard to get an LAP.
Enough Time to Pay Back
You get up to 15 years to pay back LAP in comparison to other types of loans where it could be around 7 years.
Easier Monthly Payments
LAP allows for EMIs which means easy monthly payments. It’s like having a lower monthly rent for your loan. But remember, even though it’s tempting to choose a longer duration to pay, it’s better to pick the shorter duration to reduce your total loan repayment amount.
Types Of Loan Against Property:
Loan Against Commercial Property
Loan against commercial property involves using your office space, shop, or industrial real estate as collateral. This type of loan is sought for various purposes such as business expansion, addressing personal financial needs, or investing in a new venture. While interest rates are generally competitive, the loan amount is determined by the current market value of the property.
Lease Rental Discounting
It’s like borrowing money using the rent you get from your property as security. The lender gives you a loan based on your rental income, and you can use the money for things like growing your business, buying something new, or paying off bills. Where your rent is paid to the lender as EMI.
Loan Against Residential Property
Similar to commercial property, this type involves pledging your residential real estate for funds. Often used during emergencies, the funds acquired can be channelised to consolidate debts or for home renovation.
Loan Against Co-owned Property
If a property has multiple co-owners, this option allows pledging it as a collateral. However, it necessitates a No Objection Certificate from all co-owners and rules may vary among lenders.
Top-up Loan Against Property
Also known as a second mortgage, this loan can be taken on top of an existing property loan. However, obtaining a top-up loan involves more stringent eligibility requirements, including repayment history and credit report considerations.
Documents You Need To Submit
Identity Proof: Passport / Voter ID / Driving License / PAN Card / Aadhaar Card
Address Proof: Driving License / Voter ID / Utility Bill (Last 2 months) / Registered Rental Agreement / Passport
Financial Statements: Last 6 months’ bank statements / Last 6 months’ bank passbook, Latest ITR along with computation of income, Last 2 years’ B/S & P&L a/c certified by a CA
Business Continuity Proof: Shops and Establishment License / GST Registration Certificate / VAT Returns / Sales Tax Returns
Incorporation Documents: Certified copy of Partnership Deed, Certified copy of MOA / AOA
Documents For Secured Business Loans: Copy of all property documents
In summary, LAP offers various options catering to different needs. Before applying, assess your financial requirements and repayment capacity. Keep in mind that defaulting on the loan allows the lender to seize the pledged asset, so carefully review all terms and conditions in the agreement.
