The present credit market provides a loan seeker with a number of credit products. Some of the credit products are to be used for a specific use such as a home loan or education loan while some others come with no restriction of usage. Such loans are called multipurpose loans.
A personal loan is the most availed multipurpose loan of the present day. But never to ignore the fact that a personal loan is an expensive credit product. One of the best alternatives to a personal loan is a Loan Against Property (LAP). A loan against property is a multipurpose, fast processing and much cheaper credit product than a personal loan. There are several benefits of LAP, and in today’s article, we are going to get introduced to all these benefits.
Top 10 Advantages of Loan Against Property
Simple Approval Process
Among many other benefits of a loan against property, the ease of approval is one of the prominent benefits. Availing a loan against property is much easier than availing an unsecured personal loan. The only thing which one needs to take care of is that the property title is free from any kind of mortgage litigations.
A loan amount availed through a loan against property is free from any restriction on usage. The borrower can use the loan amount for any purpose. May it be a home renovation, pursuing higher education, home construction, medical expenses and so on. A loan against property is a fit for all monetary needs.
A loan against property is a much economical way of availing the needed financial support. A loan against property interest rates is much cheaper than unsecured multipurpose loans. The interest rate of a LAP ranges from 12% to 15% whereas the interest rate of a personal loan which is similar ranges from 12% to 25%.
Flexible Loan Tenure
The loan tenure of a loan against property is a quite long one. The tenure of a loan against property can be stretched till 15 years whereas the longest tenure of a personal loan is 5 years. A longer tenure creates less financial pressure on the borrower.
Borrowing Against Different Property Types
To avail a loan against property, one can use various kinds of property. One can mortgage a self-occupied house, a commercial property as well as a rented residential property or it can be a piece of land that the borrower owns.
The pre-closure of a loan against property is generally free from any charges or penalties. One can close a loan against property account by paying the outstanding amount sooner than the term decided. But the point to consider that if your loan is on a fixed interest rate, you may need to pay a nominal amount in the name of prepayment charges.
A loan against property comes with a top-up facility. Just like a home loan or personal loan, one can take a top up loan on an existing loan against property. A top up on loan against property is provided by mortgaging the same property but with minimal paperwork.
Minimal Debt Burden
The debt burden of a loan against property is much lighter than a personal loan. There are two factors which make a loan against property a lighter debt is the low-interest rate and longer tenure. Both together make the EMI amount a smaller one, hence the debt burden is lighter when it comes to a loan against property.
Unlike other secured loans like a gold loan, the ownership of the property will still be with the borrower. The borrower can use the property as earlier. No changes or ownership authority of the lender will be liable. The only thing which the lender will have is the custody of the mother deed and the sale deed of the property until the loan is paid off.
Optimum Use of Property
A loan against property gives you the best value of your property. It unlocks the real potential of the property. Along with the general use of a property, it makes you get a loan at a lower interest rate. A property can become very good collateral of secured loans. The borrower can retain the ownership of the property while availing a loan against the same property.
Flexible Loan Amount
The loan amount which one gets through a loan against property depends on the price of property in the present market. One can get a loan amount of up to 70% of the property value. The loan amount can be as high as 5 crores.
A loan against property is a much better way of availing a bigger amount in a hassle-free manner. The only thing the borrower has to keep in consideration is that the property is mortgaged for the loan and nonpayment of the loan may make one lose their property.