Loan against property: A genuine solution for your fulfill your dreams

Posted by Nikhil Pandey on October 7th, 2016

Even when you plan meticulously, at times when your finances are stretched, you will feel the need of financial help. At such point of time borrowing from family or friends might be an option but there is a fear of rift being created in the relation if not paid on time. Secondly, jewelers and traditional finances charge extremely high-interest rates with not flexible means for loan repayments. The best way would be leveraging an asset you own – your house or other property you own.

Today, leading government governments and private sector finance companies offer Loan against property (LAP) at competitively low-interest rates, fair amount of repayment tenure and flexible repayment options. LAP is one of the most convenient forms of loan available in the market. It is the most preferred options in today’s time when you want large funds for business expansion, child’s higher education, wedding expenses, constructing a house in native, closing off other high-cost loans, etc.

LAP is given against the mortgage of property. It is provided at a certain percentage of your property’s market value. It may usually stand around 40% and 60% of your property value in the market. Thus, these kinds of loans help you leverage the economic worth of your home along with continuing to enjoy occupancy of the same so that you get immediate finance to meet a variety of personal and business needs.

Transfer of property Act, 1882, defines LAP as “the transfer of an interest in a specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan and existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. The fact that your property is kept mortgage with the bank creates a sense of security with bankers. This lets them offer loan at relatively low-interest rate and flexible repayment options.

Some advantages of Loan against property:

•A loan of up to the value of 60 – 70 % of the value of your property is offered. The maximum loan amount that can be availed is around 5 crores.

•An overdraft option helps you to the borrower a large amount depending on your requirement. You can avail this after providing your property as collateral.

•Processing time is much less compared to home loan applications

•If the value of the property has risen during the tenure of the loan, owners can avail a top-up on their existing loan. It is especially useful for business men.

•You have flexible repayment option such as part payment of foreclosure and ample time of around 5 to 15 years for repayment.

Banks and financial companies provide LAP at rather low-interest rates compared to personal loans. In today’s highly inflating economy time, if you were to take a personal loan, the interest rate would be as high as 15 to 22%, whereas taking a LAP means you enjoy the benefits at a mere cost of 10 to 13%.  These loans are at low rates because your property is guaranteed against the loan amount.

Consider the processing fees, stamp duty, valuation fees, technical and legal charges and other administrative charges that new bank will levy upon you. Compare it with the interest rates and calculate the profit or loss margin. If it seems profitable then go ahead with the loan balance transfer.

If you have paid a larger amount of money towards the loan don’t display it entirely to the new lender. Offer banks or finance companies lesser amount of collateral. Negotiation is the best trick to get the best deals offers. Compare the offers in terms of interest rates & flexible repayment options before closing the deal.

Every bank will have a different form of processing fee that ranges around 0.50% of the loan amount. For a better understanding of documentation & fee charges, you can always visit a relevant site and make sure the mandatory documents are available at the earliest for an application.

Loan against property is a blessing in disguise for people who are struggling to arrange large funds in a short span of time. Not only the money is arrangement but the mortgage calculators help you plan your repayments in a very efficient manner. You can stay prepared with the monthly EMI’s, interest applicable and ways to save money for loan repayment.

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Nikhil Pandey

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Nikhil Pandey
Joined: September 8th, 2016
Articles Posted: 30

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