An emergency can bring with it urgent fund requirements as well. Taking help from friends and family will not only harm your reputation, but there are chances that you have to return empty hands as well from their door. Getting finance when it is urgently required is not easy. Also, finance and relationships are something that should never be mixed.
That is why availing a loan is the best solution. All that is now required is to find the best financial solution for your crisis. Let’s evaluate the option of Loan against property in this regard and assess whether it can prove to be having some hidden potential power which will prove to be most suitable for the financial crisis.
Loan against Property – Concept
As the name suggests it a loan availed against the security of a property which can be a building, an apartment, or a land. Availing a loan against property does not require you to specify the reason you are taking a loan, which makes it convenient to obtain. You can use the loan amount for a medical emergency, for marriage expenses, children’s education, business, etc. Flexible repayment options and competitive rates of interest are one of the main features of Loan against property. The rate of interest is even lower than the personal Loan.
In addition to individuals, residents of co-operative societies can also avail Loan against property, but they will be required to submit a NOC from the respective society.
The procedure of Loan Against Property
First of all, the market value of the property is assessed by the lender, followed by a check of your credit history along with eligibility for the Loan against property. Each lender has their own eligibility factors. However, some of the common elements are:
- The age limit is between 21 to 60 years.
- A salaried applicant is required to submit identity proof, Form 16, income proof which can be bank statement of last 6 months at least.
- Similarly, self-employed applicants have to provide identity proof, IT returns of the last 2 years, documents of the property.
- A signature proof is also required from the applicant.
- Under Loan against property the Loan ranges between Rs. 2 lakhs and Rs. 10 crores.
The maximum limit for the loan amount in the case of Loan against property is 75% for residential property, 70% for industrial property, and 60% for commercial property.
The maximum tenure for a loan against property is 15 years. Although, if you get some extra funds, you can even repay the Loan earlier as well.
LAP vs. PL
Loan against property and personal loan have some key differences. The rate of interest in the case of personal loan is higher than that of Loan against property. But in a personal loan, you are not required to keep anything as security with the lender. Whereas in case of Loan against property, mortgage exists, that is why you must be sure of repaying the Loan or else the property can fall into the hands of the lender. Also, the maximum tenure of personal Loan is 5 years, whereas it is 15 years for Loan against property.