A Loan Against Property (LAP) is a secured credit option sanctioned against an asset that serves as collateral. Individuals can provide owned land, commercial premises, or a house as an asset to avail this loan.
Besides understanding what a Loan Against Property is, it is important to note that there is no restriction on how the borrower uses the amount sanctioned through this loan. It can be used to meet any personal or business requirements.
- Sponsoring higher education
- Purchasing or constructing a new house (down payment)
- Home renovation
- Meeting medical expenses
- Purchasing high-end equipment
- Restocking inventory
- Replenishing working capital
- Debt Consolidation
- Funding a wedding
Additionally, as compared to unsecured credit options such as personal loans, a Loan Against Property offers a higher loan amount for an extended tenor at lower LAP interest rates. Another important benefit is that its rate of interest is relatively lower for a Loan Against Property as compared to unsecured options.
With this credit option, avail of up to 70–75% of the property’s (collateral asset) prevailing market value as the loan amount. Applicants have to submit the property ownership documents, along with other relevant ones, to secure loan approval. After verification and loan approval, the sanctioned loan amount is transferred to the applicant’s account. The asset in question and property documents remain with the lender as collateral until the entire borrowed sum is repaid.
Loan for Lease Rental
In this type of financing, a property that is a source of rental income can be pledged to raise funds. In Lease Rental Discounting, the funds are offered against the rental income that is likely to be received from the property. Accordingly, the rent paid by the tenant goes straight to the lender.
Loan for Commercial Property
This particular type of Loan Against Property allows borrowers to pledge an asset as collateral to purchase a commercial property. It proves useful for traders or business owners and enables them to switch to better and more spacious office space, a factory, or even a warehouse.
Loan Against Commercial or Residential Property
This loan option allows raising funds against an owned commercial or residential property to meet funding requirements. The sanctioned loan value depends entirely on the property’s market value.
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