Most people either use their savings or dissolve their investments in a financial emergency. Another option is to take a loan. While a personal loan is the most common loan people take, as it does not require any collateral. So they are quicker to obtain. Also, people tend to use them blindly since there is no end-use restriction. However, the interest rate on unsecured loans is typically higher, and the funds approved might not be enough to meet your needs.
Another option is to take a secured loan. As the name suggests, a secured loan is provided against collateral. Amongst the most common secured loan is a loan against property. Usually, people are unaware of the value locked up in their property while analysing the numerous lending options available! A loan against property is an excellent solution if you need to borrow a lot of money with easy interest rates.
Loan Against Property: What Is It?
A secured loan known as a “loan against property” (LAP) uses real estate as collateral to secure the loan amount. The main requirements for loan approval are the property’s freehold status and completion as a finished product. But some lenders grant a LAP even in exchange for a piece of land. The property’s value, roughly 70% of the total property value, determines the loan amount.
Depending on your needs, LAP can be utilised for various purposes, like home improvement, family weddings, higher education or business expansion. Because it enables you to access the locked-up value of your property while maintaining occupancy, a loan against property is regarded as an efficient solution to your financial needs. Additionally, a loan against property has a lower interest rate than an unsecured loan.
What makes taking a loan against property a wise decision?
A loan against property is your best decision over all other types of loans if you own a wholly constructed residential or commercial property free of any other debts. Given that the loan is secured by the collateral, which is your property, it gives a substantial amount of money at a reduced interest rate. Some lenders also offer an overdraft facility to LAPs. In this approach, you use a portion of the approved credit limit as necessary and only pay interest on the amount you use.
The top 5 reasons to use a loan against property to finance your objectives are as follows:
#1 No Limitations on End Use
As long as the purpose is legal, the borrower may use the loan against property for any purpose. Therefore, you can use it as a personal loan for debt consolidation, business growth, house improvement, a child’s wedding, education, and other purposes.
#2 Big Loan Amounts
Compared to other categories, such as personal loans, the loan amount you can acquire in this category is determined by the property’s value. This enables the borrower to utilise their property better and obtain a larger loan amount. Usually, 50–60% of the property’s market value is granted. Depending on the borrower’s profile, up to 70% of the property’s worth can be borrowed (as with commercial properties).
#3 Nominal Interest Rate
For the borrower, the interest rates for loans secured by property are generally cheaper. A lower interest rate results in cheaper EMIs and a smaller interest outlay for the borrower because the loan is secured. A loan against property should be one of your top choices if you need a loan with a higher amount and long-term repayment tenure, as it will be simpler to repay. Use a loan against property calculator to calculate and plan your repayment better.
#4 Longer Repayment Tenure
The term for a loan against property can last up to 15 years, compared to 4 to 5 years for personal loans. This aids in relieving the borrower’s financial strain. Some people also prefer to take out a loan secured by real estate since it allows them to choose a loan with a longer term.
#5 Simple Eligibility Requirements
Since a loan against property is secured, individuals and businesses can easily meet the requirements. LAP varies depending on whether you are an SME (Small Medium Enterprise), a self-employed or a salaried professional. The necessary documentation would need to be submitted for the verification process.
These are the top reasons for using a loan secured by real estate to fulfil your objectives. You can prefer India’s leading financial institutions and NBFCs like Fullerton India, who can help you meet all your demands at any stage of life with a Loan Against Property. A reputed loan provider guarantees the most seamless and hassle-free application process online.
Now that you know the LAP process, you can prefer it over an unsecured loan to fund your life’s objectives with minimum hassle.
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