6 Must Know Things For Loan Against Property

  Author: Naveen Kumar

We may plan out our finances but even then, financial emergencies may crop up.  It is not uncommon for some of us to get into a situation where we need a large amount of money. It could be a sudden requirement like a family emergency or for a requirement where our accessible savings may not be enough. In such situations, we can consider a loan on property or loan against property (LAP). While going for a loan against property, you need to keep these following aspects about this loan in mind.

Be sure of your repayment capacity Loan against property is a property loan and involves mortgaging your property. You need to be fairly sure about your ability to repay. Remember, a repayment default means loss of the property.

Factor in long processing period The processing of a loan against property may take anything from a week to a month. So, this loan is not for those seeking an instant loan.

Know about eligible loan amounts Self-occupied residential property typically qualifies for a loan of up to 60 per cent of its market value while for a rented out property it is 55 per cent. Self-occupied commercial property qualifies for a loan equivalent to 50% of market value while the limit goes down to 40% if it is rented out.

Lower interest rates than personal loans As with other loans against other assets, in case of loans against property too, the interest rates are lower than those for person loans and credit card debt.

Choose loan tenure with care Maximum tenure of loan against property is typically around 15 years. Avoid taking the loan for longer tenure as you would end up paying higher interest.

No tax benefits Unlike a home loan where you get tax benefit on both interest and principal repayment, in LAP you do not get any tax benefit.

When you are in urgent need of a large amount of money, a loan against property is one of the best options to get a loan at a lower interest rate. However, before going for such a loan, it is crucial that you know about its features. This will help you figure out whether you really need this kind of loan to address your need for additional funds.

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