Loan Against Property is such a loan that can be taken by mortgaging one’s residential or commercial property. Any Salaried Person and Business can apply for this loan. This is a type of secured loan in which your property is used as collateral by the bank and financial institution. The loan amount is decided by the financial organizations according to the market value of the property.
This loan can be used to meet expenses like education, marriage, business, medical needs and travel. Compared to the rest of the loan, in Loan Against Property, the consumer is given a loan at a lower interest rate. There is also more time available to repay the loan as compared to a personal loan.
The point to be kept in mind while taking this loan is that you should always repay the loan received on time because failing this, the financial organizations have every right to recover the value of the loan amount from your property.
Types of Loan Against Property
Residential Loan Against Property:
In this loan, you can use your residential property to take a loan, residential property includes a house, apartment and land etc. Commercial Loan Against Property: In this loan, you can take the use of your commercial property. Shops, offices and industrial units come under commercial property.
Lease Rental Discounting (LRD):
If rental income is received from a property, then the owner receiving that rental income can apply for the loan. The loan amount is sanctioned by the lending financial organizations after valuing the rental income.
Industrial Loan Against Property:
If a business has its own factory, manufacturing unit, or warehouse, then the business owner can get a loan through these assets.
In Loan Against Property, you take a loan against your property, there are many advantages of taking this type of loan, as compared to other loans, you can get the maximum loan according to the market value of the property, which has no limit. Apart from this, your interest rate is also low on this loan. You get a long repayment tenure to repay this loan. You can use the mortgaged property even after taking the loan.
In Loan Against Property, loans are given by finance companies at the least interest rate. If seen, it starts with 8% annual interest rate, but still in many circumstances the interest rate depends on the person taking the loan, the financial company providing the loan, the financial capacity and credit score of the borrower. Apart from this, there is also a difference in the interest rate of commercial and residential property.
Loan Against Property balance transfer is a facility in which the borrower transfers his LAP balance from the already existing loan provider to the new loan provider. This option is beneficial because the new loan provider provides better offers and interest rates to the borrower than the previous loan provider. In this loan, the old loan provider is given full money from the new loan provider chosen by the borrower and the borrower pays the remaining amount as a loan to the new loan provider.
There is a process to convert Loan Against Property into Home Loan which you can understand with this example. Person A has taken LAP from a bank, Person B liked the property of Person A and wants to buy that property under home loan.
In this case person A will go to his bank and demand for “Foreclosure Letter” of LAP. This letter will contain information about the remaining loan amount. Now person A will hand over the “Foreclosure Letter” to person B.
Person B will apply for the Home Loan by submitting the “Foreclosure Letter” to his bank. The bank will approve the home loan based on the financial profile of person B, thus loan against property can be converted into home loan.
Under the notice, an alert will be sent to you to repay the loan amount within a due date. Other charges will be added on top of your normal repayment. If you do not pay for a long time, then steps will be taken to take legal action against you. Even on this, if you do not take any action, your property will be put in the auction. Due to all this, you will lose your property, you will suffer loss of money, as well as your chances of getting a loan in future will be less due to bad CIBIL score.