You may have a lot on your mind when it comes to sending your children for education abroad or maybe finance your business or even finance your child's wedding. The first thing that would come to the mind of most of us is, 'Where would I get the money from?
There are many ways you could arrange for money, and one of those ways is taking a loan. You could take a personal loan for the amount required, or you could take a loan against your property.
What is a loan against property?
A loan against property (LAP) is exactly what the name implies -- a loan given or disbursed against the mortgaged property. The loan is given as a certain percentage of the property's market value, usually around 40 percent to 60 percent.
Loan against property belongs to the secured loan category where the borrower gives a guarantee by using his property as security.
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What purposes can I take a loan against the property for?
Loan against Property can be taken for following purposes:
Expanding your business
Getting your son/daughter married
Sending your son/daughter for higher studies abroad
Funding your dream vacation
Funding medical treatments
What kind of properties can I mortgage a loan?
You can normally take a loan against your self-occupied or rented residential property. This could be a house or even a piece of land.
What are the eligibility criteria to get a loan against property?
This criterion will vary from one bank to another. However, from all the host of factors, the common factors that all banks look at are:
Your income, savings, debt obligations
Cost/value of the property mortgaged
Your repayment track record for other loans, credit cards, etc.
What are the normal interest rates and tenure for repayment offered for a loan against property?
Interest rates on loan against property range from 12 percent to 15.75 percent and the loan tenure can be up to 15 years.
How is a loan against property different from a personal loan?
Maximum loan tenure for LAP is up to 15 years (180 months)
Maximum loan tenure for a personal loan is up to 5 years (60 months)
Maximum loan eligibility is determined primarily by the value of the property and income
Maximum loan eligibility is determined primarily by an individual's income
What documents are required for applying for a loan against property?
Most banks and financial institutions typically require the following documents. However, this list may vary from bank to bank.
A loan against property is one of the best ways to raise money. The only disadvantage of such a loan is that if the borrower is not able to pay the loan fully, the bank or the financial institution can take possession of the mortgaged property. Base your decision on your repaying capabilities.