One of the safer options for long-term funding is to apply for a loan against property (LAP). LAP is defined as borrowing sum from a lender by guarant
One of the safer options for long-term funding is to apply for a loan against property (LAP). LAP is defined as borrowing sum from a lender by guaranteeing your property to the lender. This is also one of the most popular ways to meet emergency fund requirements as the value of the property will not depreciate, and many lenders regard property as high value. This allows you to borrow or secure a more substantial sum as a loan.
In case of non-payment of the principal amount, the lender can liquidate the property. Although this option may sound enticing and attractive to many, this mode of lending does have its fair share of pros and cons. So, anyone who is looking to secure funding must read all the conditions and present loan against property documents required for faster loan processing. Here are the pros and cons of obtaining a loan against property:
Availing loan against property has several advantages, a few of which are discussed below:
- Lower Interest Rates: As loan against property is a secured loan, the interest rates are lower compared to personal loans. The interest rates range from 11 to 15 percent. The loan tenure is also flexible as it can be extended up to 15 years.
- Property Definition: One of the most significant advantages of LAP is that the loan can also be secured against a property that is leased out. So, in addition to monetizing property that is self-owned, you can also utilize your leased properties.
- Loan Amount Disbursal: LAP also has the flexibility of how you want to receive the loan amount. You have the option to receive the whole sum as a one-time payment or you can receive it as an overdraft too.
- Lower EMI: The repayment period of LAP ranges from 1 to 9 years with an option to extend the tenure. So, the monthly installments are more economical as compared to other types of loans.
- No Prepayment Penalty: Prepayment penalty is a clause inserted to safeguard lenders from losing their interest amount if the borrower pays a loan sooner. But no such penalty is there in LAP.
A few of the downsides are:
- Longer Processing Time: LAPs are subject to huge scrutinization. There are a lot of background checks on both you and your property to unearth any disputes. This will lead to longer wait times and processing time to secure the loan.
- Loan Amount: As the valuation of the property is determined by the lender, the lender also decides the loan amount. Typically, not more than 75 to 80 percent of the property value is disbursed as the loan. Additionally, they don’t value the property at market value but less than that. This reduces your loan principal further.
- Stringent Norms: As compared to home or education loans, the eligibility criteria and norms for LAP are more stringent. Before sanctioning loans against property, the income of the borrower is also considered for judging their repayment ability.
- The property at Risk: In case of non-payment of the loan, the lender has the complete authority to sell off your property to settle its dues. This puts borrowers at a higher risk as they stand to lose their property to market value while not being able to secure a loan amount properly or non-repayment.
Every fundraising method has its fair share of pros and cons. Loan against property has relatively low-interest rates, but you risk low property value. LAP is an excellent way out if you are in urgent need of funds. Depending on the pros and cons, you might decide to borrow a LAP. Your decision must also depend on the urgency in the requirement of funds.
With easy approval and flexible repayment options, choose our Fullerton India loan against property for an emergency, business expansion, etc. and realize the true value of your property. Unlock the power of your property and release your stress. Before borrowing a loan, you must read all the documents carefully before proceeding because you are taking a very important step in your life so all the documents are read very carefully. If you are facing any issue to understand the document call agent to explain to you one by one all the terms and conditions.