Loan Against Property (LAP) is a secured loan that leverages your residential or commercial property as collateral. While many people are familiar with the basic concept of a mortgage, there are several lesser-known facts about LAP that make it an attractive financial tool. This article delves into these facts and highlights the positive aspects of opting for a Loan Against Property.
Lesser-Known Facts About Loan Against Property
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High Loan Amounts
Substantial Funding: One of the significant advantages of LAP is the high loan amount you can secure, often up to 60-70% of the property’s market value. This makes it an ideal option for funding large expenses like business expansions, medical emergencies, or higher education.
Flexible Usage
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No End-Use Restrictions: Unlike some loans that are earmarked for specific purposes, LAP offers flexibility in usage. You can use the funds for a variety of needs, whether personal or business-related, such as debt consolidation, weddings, or starting a new venture.
Longer Repayment Tenure
Extended Tenures: LAP typically comes with longer repayment tenures, ranging from 10 to 15 years. This extended period makes it easier to manage monthly EMIs and reduces the financial burden on the borrower.
Lower Interest Rates
Competitive Rates: Compared to unsecured loans like personal loans, LAP generally offers lower interest rates. This is because the loan is secured against your property, reducing the risk for lenders and translating to more favorable terms for borrowers.
Tax Benefits
Interest Deductions: Under certain conditions, you can avail of tax benefits on the interest paid on a Loan Against Property. For instance, if the loan is used for business purposes, the interest paid can be claimed as a business expense.
Credit Score Improvement
Boosting Credit: Regular and timely repayments of your LAP can significantly improve your credit score. This makes it easier to secure other forms of credit in the future and potentially at better rates.
Balance Transfer Facility
Lower EMI: If you find a lender offering better interest rates or terms, you can transfer the outstanding balance of your LAP to the new lender. This facility allows you to reduce your EMIs and overall interest burden.
No Immediate Sale of Property
Asset Retention: Opting for a LAP allows you to leverage your property’s value without selling it. You retain ownership and continue to benefit from any appreciation in the property’s value over time.
Partial Disbursement Options
Tailored Disbursements: Some lenders offer the option of partial disbursements, where the loan amount is released in tranches based on your needs. This is particularly beneficial for business owners who require funds at different stages of a project.
Conclusion
A Loan Against Property is a powerful financial tool with numerous lesser-known benefits. From the ability to secure large loan amounts at lower interest rates to the flexibility of usage and tax advantages, LAP offers multiple positive aspects that make it an attractive option for borrowers. Understanding these nuances can help you make informed decisions and effectively leverage your property’s value to meet your financial needs.