Why Someone Need A Loan Against Property? Why Someone Need A Loan Against Property?

Another name of Mortgage loan is Loan against Property(LAP). If you require funds for meeting personal and business needs, you can apply for a mortgage loan. Usually these loans are considered as a secured loan and the interest rate on a LAP is lower in comparison to other unsecured loans.

The best part about LAP (loan against property) is that both salaried and self-employed individuals can apply for one. There are many financial institution available which are offering Loan against Property.

You can take a loan against property for both businesses as well as personal needs. Some of the basic need for which an individual take a LAP :

1.) Business purpose: An individual can take a loan against property for starting a new business, as bank do not provide a business loan for the purpose of starting a new business, it is provided on behalf of an existing business. For meeting requirement of fund for the start-up of a new business, you can go for a secured loan i.e mortgage loan, property loan, gold loan etc. It can be also used to purchase inventory, buy machinery and equipments and to meet working capital expenses of the business.

2. Medical Emergency: Life is uncertain, you never know when medical emergencies may arise. Loan against property helps to meet your requirements of the fund when there is an emergency.

Medical bills run in thousands and lakhs and to pay such a large amount of bills, needs for funds arises. LAP helps to overcome these unforeseen medical emergencies.

3. Wedding Marriage: Weddings are one of the most joyful and memorable events for any individual. While marriage spends in India varies among people based on their preference and spending capacity. But you don’t have to worry about the expenses, there are various ways available to arrange funds for marriage and taking a mortgage loan is one of them

4. Study in Abroad: Nowadays, education has become necessity of life. But it does not come with a cheaper price tag. Students spends thousands and lakhs of rupees in higher education and some even wants to go abroad for higher studies which requires finance in a large amount. A loan against property helps an individual to pay off these education fees and dream of getting a degree from reputed universities comes true with the help of a loan.

Other benefits of loan against property are :

  • Usually an unsecured business loan is provided to the businessman and personal loan is provided to the salaried, but loan against property is the loan which can be avail by both Salaried and Self employed against property.

  • Investment is the key to gain financial stability in you life and you can use the loan amount for investing in a stock market or in purchasing any other property. You can also buy a share, debenture etc. Travel With the amount of loan against property, you can full fill the dreams of traveling all over the world. A requirement of funds arises to purchase tickets, buy things or other travel expenses, all can be done with the help of loan against property.

  • Lower ROI Generally, the ROI (rate of interest) of loan against property is comparatively lower as compared to the other loans because LAP is no a unsecured loan and provided against a security.

  • As we all know that Lap is a secured loan, the tenure of the LAP goes up to 15 years. The longer tenure ranges from 3 years to 15 years. Which leads to an affordable Mortgage Loan EMI.

  • As tenure is higher and the interest rate is significantly lower on LAP compared to a personal loan or other unsecured loans.

Eligibility criteria to Apply: You are required to fulfill the general criteria of loan against property in order to be eligible for applying

Age:  there is no fix minimum and maximum criteria for applying for a loan but if your age is between 21 to 55 years then the chances of getting approval will be better for you. Must remember you need to repay you loan completely before the age of 70.

Income: Monthly income for Lap is Rs 25,000 or more, depends on your profession, location and other criteria.  For the same loan, self-employed individuals will need little bit more, income of more than Rs. 3 lakhs.

Business Stability: A self-employed person should be in business for a minimum of 5 years during which the business should be profitable.

CIBIL score: A CIBIL score of 650 and above is considered good to avail any secured loan. A personal with less than 650 CIBIL score will lead to rejection of your loan application.

Property Value: The amount of your mortgage loan depends on the value of the property which is used to be mortgaged.

Property approval and documents: Bank will only sanction your loan if your property  is approved by the officials and Banks.

Conclusion: Above are the purposes for which an individual can avail loan against property. By using this you can use your funds in the best way.

Also, make sure that you fulfill the eligibility criteria. You can apply for a loan against property by visiting the bank website or through an online aggregator.

by Tushar Singh
References and Bibliography
Tushar Sharma is a financial advisor, I love to write about finance, Loan against property etc.
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