The many benefits of loan against property have increased the demand for LAP. People who own a residential or commercial propertyprefer LAP to personal loans or business loans. Often people start with queries like, home loan kaise milta hai and end up with LAP le liyahai. But what has loan against property become so popular? Read on to know the 5 most important benefits of taking a LAP.
#1 – Easy Approval
While taking a LAP, you pledge your asset as collateral. Hence, the approval process of the loan is very easy, and the loan is sanctioned within 72 hours in most cases. Your property acts as a mortgage, which ensures security as compared to unsecured loans. Not only is the approval process easy, but also the amount of loan sanctioned is much higher than other loans.
#2 – Partial Loan Disbursement
A loan against property also gives you the benefit of partial disbursement. You may have been sanctioned a huge loan but may not need all the funds immediately. In this case, you can get a part of the loan amount disbursed to you and keep the remaining amount safely for later use. Partial loan disbursement is usually beneficial when you take a loan for construction or long-term purposes. The best part of partially disbursing your loan is that you pay interest only on the amount transferred and not the sanctioned amount. This means your EMIs are much smaller too.
#3 – Long Tenure, Low EMIs
As the LAP is of a larger amount, the financial institutions give a larger timeframe to repay. In most cases, the tenure is between 10 to 15 yearsand in some cases, even 20 years. The loan tenure depends to a large extent on the amount of loan sanctioned.A longer loan tenure gives the borrower plenty of time to repay the amount in small EMIs. The interest rates are comparatively lower since it is a secured loan.
#4 – Allows Prepaying
You are free to repaythe loan against property and close the loan ahead of time. You are not charged or penalised by the lender if you want to pre-pay your loan amount. This makes closing of the loan easy and hassle free.
#5 – Tax Benefits
While evaluating your options, you must keep in mind the tax benefits on a loan against property. Do remember that the interest paid is eligible for the benefit and not the principal amount.
The sections under which you can claim tax benefits are:
Section 37 (1) of the Income Tax Act, 1961 is applicable when you take the LAPto meet commercial or business purposes
Section 24 (B)becomes applicable if you have taken the LAPfor purchasingother property. The maximum deduction in this case is Rs. 2 lakhs and you must provide substantial proof regarding the use of funds.
#6 – Can be Used for Multiple Purposes
There are several reasons for taking a loan against property. LAP is sanctioned to you by the financial institution under many circumstances like:
- Starting or expanding business
- To pay for your child’s/children’s higher studies
- To meet your child’s wedding expenses
- To cover for a medical emergency in the family
#7 – Ownership of the Property
The best part of the loan against property is that the ownership of the property remains with the borrower even after pledging the asset as collateral and mortgaging the property for funds. The property remains in your possession, and you can continue to use it. However, if the borrower is unable to re-pay the loan, the lender has the option to sell-off the property and pay the loan.
Loan against properties is an easy option to fulfil your personal and business goals. It is quite easy to get these loans and pay them back in small EMIs spread over a long period of time. The financial burden is lowerand the borrower can retain and use the property that has been put up as collateral.