loan against property

5 Top Benefits of Securing Loan Against Property

When we need a huge quantity of money quickly, one option that often comes to mind is applying for a loan. Personal loans, company loans, and loans secured by personal property are a few of the many loan options available, and it may not be easy to narrow down the list to just one.

However, the market for lap loans is expected to grow to more than 850 billion by FY2026, reflecting the product’s rising popularity. If you have a strong credit history and can reliably make your loan payments on time, a loan against your home may be the best-secured lending choice. Let us see what a LAP entails. 

What is a “Loan Against Property?”

Use the equity in your home or business to get a loan that may be used for various purposes like paying bills to expand your company with a loan against property (LAP). A LAP might be the answer if you need money and have a home, office space, or retail establishment that you can put up as collateral.

With the relative simplicity with which a LAP may be utilized and its many advantages, you can be confident that you will achieve essential life objectives like getting married, going to college, or growing your company without risking your long-term financial security.

Taking Out a Secured Loan Has Its Benefits

The seven main benefits of a loan against property are as follows.

  • Reduced Interest Rates

One of the most appealing features of a LAP is, without question, the low-interest rate. Lenders’ exposure to loss is minimal since they have the legal power to foreclose on the property. As a result, lending institutions are willing to offer a reduced interest rate, bringing down your EMI and making borrowing money easier.

  • Quantitatively Larger Sanctions

You may borrow a sizable sum of money relative to the value of your home if you decide to take out a loan against it. The credit amount may range from 70% to as much as 75% of the value of your property, with the range varying depending on whether the property is residential or commercial. This sum is sizable and may be used toward a variety of personal and professional projects.

  • Extending the Timeframe for Repayment

LAPs allow you to spread out your loan payments over a longer period. You may secure a repayment tenure of 10 to 20 years to pay back the loan amount. However, the precise time frame will vary from lender to lender.

Having such a mortgage loan tenure means you may choose affordable monthly payments that are easier on your budget. This aspect of lap loans, along with their comparatively low-interest rates, makes them an excellent tool for assisting start-ups and small enterprises.

  • Maintaining Property Use

You may still utilize the property and exercise your ownership rights even after you’ve secured a loan against it. As a result, you may use the property as collateral for your loan without giving up any of the uses to which it was initially put. Mortgages may be secured by a wide variety of real estate, including residential and commercial properties, whether leased or owner-occupied.

  • Disbursement of Partially Obtained Funds

You may choose how much of your loan against property you want to take out at any time. Loans are dispersed in installments when they are only partially paid off. This function may be quite beneficial if the loan is needed over an extended period, such as throughout the many phases of a building project. You are only responsible for paying interest on the loan amount you use, even if that amount is spread among numerous tranches. 

  • Easily Acquire a Loan

It is significantly simpler to gain permission for a LAP than for other unsecured loans. Lenders feel secure about the money they give out. Because of this collateral, getting these loans is much simpler. Furthermore, LAP is open to both the self-employed and the employed. To acquire the amount sanctioned, the borrower has to provide the lenders with the necessary paperwork (such as a PAN card, copy of the property papers, address verification, etc.).

  • Money-Saving Tax Breaks

The interest you pay on a LAP loan may be eligible for tax breaks under certain conditions. If you plan to use the money from your loan to expand your company, you may deduct the interest you pay and the expenses associated with processing the loan under Section 37(1) of the Income Tax Act. Also, if you utilize your loan money to buy a home, you may deduct up to Rs 2 lakh from your taxable income under section 24(B) of the Income Tax Act.

Must Read: Easy Steps to Prepay your Loan Against Property

To ensure you get these tax breaks, you’ll need to provide documentation of how much you spent on the fund. You should know that if you use your loan for things like trips, school, or a wedding, you will not be able to deduct these costs.

By Michael Caine

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