A Loan Against Property (LAP) is a loan that is sanctioned against a high-end asset such as a property by pledging it as collateral. This could either be a residential house, commercial premises or plot of land that the borrower may own. The asset is kept with the lender until the entire loan is repaid along with the applicable interest amount. Also known as a property loan or mortgage loan, it can be obtained by any eligible applicant; be they salaried, self-employed or professional individuals. The secured nature of a Loan Against Property fetches borrowers a large loan sanction at lower rates of interest and a repayment tenor spanning several years.
What Is the Maximum Loan Amount One Can Avail Against Their Property?
Practising professionals like chartered accountants and doctors can secure high loan amounts worth Rs.5 Crore* or higher, basis eligibility when they opt for a professional Loan Against Property. These loan options are specifically customised to cater to the financial needs of professional borrowers as they do not carry any restrictions on the end usage of the loan capital.
Eligible individuals can use the borrowed money to manage any of their professional requirements like setting up a new practice, renovating current office space or clinic, upgrading the existing infrastructure, purchasing new equipment, tools or office supplies, etc. They can also secure a personal Loan Against Property to fund children’s education, overseas studies, family weddings, vacations, medical emergencies and so on.
How Does a Professional Loan Against Property Work?
There are several financial solutions specifically aimed at professionals, which include unsecured loans like personal loans and business loans. They are designed to meet a variety of commitments, but the rate of interest offered on them is usually much higher and the repayment tenor is shorter. Furthermore, the eligibility criteria could be stringent as well, necessitating a longer loan approval and disbursal procedure.
On the other hand, a professional Loan Against Property is a preferred option among loan borrowers because it fetches them easy loans with minimal eligibility and documentation requirements. Since this form of credit is offered against a big-ticket mortgage, it poses fewer credit risks for lenders; due to which, they may relax certain provisions in specific cases. Nevertheless, each lending institution may have its own set of parameters for assessing and granting loan approvals.
Striking Features of a Loan Against Property
A Loan Against Property possesses the following distinguishing attributes:
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Lower rate of interest – Secured loans like a Loan Against Property have lower interest rates when compared to unsecured loans. With a favourable credit record and CIBIL score, you can enjoy even better interest rates on your LAP.
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Easy approval – Since this loan is availed against a collateral, the Loan Against Property eligibility and documentation checks are relatively simpler, which gives you the advantage of a speedy loan approval and disbursal process.
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Flexible repayments – Property loans come with longer repayment tenors, thereby easing the EMI burden. Consequently, you can choose a suitable tenor as per your budget and convenience depending on the maximum tenor offered by your lender.
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Continued use of property – Pledging your property as security does not alter its utilisation in any way. Even after you obtain the loan, you can continue living in the property if it is a self-occupied house or for business purposes, as the case may be.
Top Five Advantages of a Professional Loan Against Property
Every profession has different business needs and a Loan Against Property helps in addressing them effectively. This type of credit is financially beneficial to professional borrowers in the below-mentioned ways:
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Essential Working Capital
Running a professional practice often involves disparate expenses like the purchase or rent of office premises, its regular upkeep, maintenance and repair of equipment, staff payments, increments or advances and more. There are also some unforeseen circumstances such as inflation that may raise your expenses. It might even lead to a collective change in overheads; or a sudden drop or rise in the demand for your services. These factors could call for higher working capital. -
Setting Up Your Own Practice
Implementing business goals like starting your own clinic or practice requires heavy financial investment which may entail a number of expenditures. Selecting the preferred location and premises, designing optimal workspaces as per requirement, purchasing office stationery and essentials, recruiting the staff, hiring other expert professionals and/or consultants, etc. - the list may be endless and a professional LAP enables you to handle them all. -
Current Business Expansion
You may decide to expand your existing practice by opening up another branch. This will again imply a huge investment towards the office space, setting up the infrastructure, staff appointments and others. Depending on the scale of operations, you will need a constant flow of money to get the office or clinic fully functional without any hassles.
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Customised Loans for Every Need
Sometimes, professionals may be in need of high-end renovations and upgrades to increase work efficiency and service their clients or patients more productively. Based on vocation specifics, a Loan Against Property for chartered accountants (CAs) will cater to different interests as compared to a Loan Against Property for doctors. Each profession has its own set of unique financial requirements
Besides, even in the medical sector, every practitioner’s demand for specialised tools and equipment varies on the basis of their area of expertise. Thus, a dentist will have different demands for tools and machines as opposed to a surgeon or a paediatrician. They also need to be in step with the latest technology and procedures, so frequent software updates and other maintenance features may form a major part of medical facility upkeep, which naturally presupposes ready availability of cash.
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Timely Financial Assistance
In an existing functional set-up, if renovations are held up due to delays in receiving the loan money, it may hinder the current workflow, inconveniencing clients or patients and further diminish your working capital making it difficult to meet regular operational expenses. A loan against collateral ensures swift disbursal of loan funds so that you don’t have to worry about hold-ups due to insufficient funds.
To Conclude
A professional loan against property allows you to make optimal use of your valued asset when you are in urgent need of sizeable funds. Despite its obvious merits, the loan requires prudent planning to safeguard against repayment setbacks. Missed or late EMIs can result in penal charges and also affect your credit score adversely. Therefore, it is imperative to weigh the pros and cons of a Loan Against Property and ensure loan viability before you proceed with the loan application.
