6 Things You Must Know For Loan Against Property

Loan against property (LAP) can be a great low cost alternative to expensive loans such as personal loans and credit card debt. Here's what you must know about them.

Welcome to FundooMoney, your 24X7 buddy for all your money matters! 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). When you do that you need to keep 6 things in mind. We will tell you all about them in just a little while.

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, repayment default means loss of the property.

Factor in long processing period 
The processing of loan against property may take anything from a week to a month.

Loan against property eligibility 
Self-occupied residential property typically qualifies for a loan of up to 60% of its market value while for a rented out property it is 55%. 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.

Loans against property interest rates 
As with loans against other assets, loans against property interest rates are lower than those for personal 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.

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