What Are the 10 Benefits of a Loan Against Property?

Scarlett Watson

2 years ago

A loan against property (LAP) is a blessing when you need money without too much of a hassle or borrowing from close friends or family members. Whether it is for medical expenditure or a wedding, foreign travel or fees to study abroad, home renovation, or short-term cash, you can avail of a loan against property easily and quickly. A loan is convenient as you can repay it over a while over pocket-friendly instalments and you can get quick sanctions with limited or no paperwork.

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How to Decide If a Loan Against Property Is Right for You

A loan against property is an attractive option if you are in need of quick cash. Here’s how to decide whether a loan against property will make sense for your situation or not.

You require the funds quickly. With many lenders, particularly those who are operating online, funds are made available in a matter of days.
You have a strong credit score. The lowest interest rates are particularly reserved for borrowers with good credit.
You want to pay off high-interest debt. A loan against property is a good way to consolidate and pay off high-interest loans and/or credit card debts.
You’ll use the funds to satisfy necessary expenses. Other valid reasons to use a loan against property include paying for emergency expenses or remodelling your house.

Advantages of Loan Against Property

#1 Big-ticket Loans

Properties typically run into millions, so, you can get a substantial amount of loan against property. However, large-size loans do not mean that you grab them. Remember, the loan against property EMIs can be substantial and you need to service the loan as well.

#2 Mortgaged Properties Mean Lower Interest

As it is an asset-backed credit product, you typically tend to get a lower loan against property interest rates on LAP than some other loans, such as personal or gold loans. The interest rates can vary based on the institution. Look for NBFCs or banks and housing finance companies that offer a better proposition as far as interest rates are concerned.

#3 Easy Approval Process

The loan against property eligibility criteria is easier to meet compared to that of other loans, as this loan is secured against your property. The loan against property eligibility criteria includes minimum age and income, credit history, as well as financial stability. Documentation requirements are minimal and some financial institutions also permit doorstep services.

#4 Various Collateral Options

To get LAP, you can use various types of property, such as self-occupied houses, commercial properties, residential properties, industrial properties, or even pieces of land. The flexibility permits easier access to the loan as well as helps use the property more efficiently.

#5 Free to Use the Funds for Any Purpose

One of the major advantages of a loan against property is that you can utilize the funds for any purpose you like – be it a holiday, a wedding, a gadget, a home renovation, a business investment, etc. A home or a vehicle loan must be used for the purpose that you’ve borrowed it for.

#6 Zero Part-Prepayment and Foreclosure Charges

In line with RBI guidelines, most lenders allow loans against property borrowers who opt for floating interest rates to repay either a portion of their loan or the entire loan amount, before the end of their tenor without any extra fees.

#7 Online Loan Account Management

Aspiring loans against property borrowers also benefit from an online customer portal, where they can execute several tasks from the comfort of their homes. One can quickly download statements, as well as satisfy the transactions, without having to physically visit a branch.

#8 Pocket-Friendly Loan Against Property Repayment Options

You can pay off your loan against property in easy instalments or EMIs. The payment terms are generally flexible, and you can choose a tenor that allows you to fully optimise your monthly outgo per your needs. Many lenders offer tenors of 12 to 60 months with affordable EMIs. You can use a loan against property EMI calculator to estimate your EMI outgo. This will help you better plan for your financial goals.

#9 External Benchmark-Linked Loans

With any reputed lending institution, borrowers have the option to avail of loans where the interest rate is linked to external benchmarks like the repo rate. Here, borrowers stand a chance to benefit from sorts of regulatory rate cuts.

#10 Contact-Free Loans

Most lenders these days are offering contact-free loans, wherein the process is completed virtually. Aspiring borrowers need to apply via a lender’s official website, after which all coordination is done via calls or emails. The only step where a borrower needs to meet a lender’s representative in person is at the final lap to sign the agreement and get done with other registration formalities.

Bottom Line

Before availing of a property loan, plan for how you’ll use the funds and how you’ll repay them (with interest). Weigh the advantages and disadvantages of taking out a loan against property rather than using another financing option. Use a property loan EMI calculator to help you determine the most suitable borrowing option for you.

If a loan against property has been on your mind for a while, seek quotes from several lending institutions to compare loans against property interest rates and loan terms. Do not forget to go through the fine print, including the notes on fees and penalties. Once you have the data, decide if the advantages of a loan against property outweigh the drawbacks before you make a commitment.

Furthermore, borrowers should also check their pre-approved offers, which they can find on the websites of financial institutions. They can do so by entering their credentials on the pre-approved section and availing of the exclusive offers and discounts. Several financial institutions extend such offers to draw more customers and simplify and accelerate the loan process.