Everyone faces a challenging financial situation at times, and a personal loan can ease the financial woes in such scenarios. Sudden hospitalisation of a family member can be the reason for immediate financial requirements. Sometimes, people want to start a new business. Therefore, they need some capital for the initial investment in the business.
Besides the reasons discussed above, people need a loan due to many reasons. When you need a loan, you have many options as a borrower. If you have a salaried job, you can find a loan according to your monthly income. If you need a higher amount as a personal loan, a LAP loan is the best option. What is LAP? LAP stands for Loan Against Property, which means you can get a personal loan against your property.
Before applying for a loan against a property, you need to know a few things about such loans. In the following section, you can find the details of the loan against the property.
- Floating Rate of Interest Is Applicable
In a loan against property, the lender charges a floating interest rate. In most cases, you will find a fixed interest rate on the loan amount. But, the loan against property works differently. It charges a floating rate of interest on the loan amount.
In most cases, the interest charged by the lender varies between 10-14%, though the interest rate may change depending on the lenders. If you contact a bank for LAP, you will find a low-interest rate with flexible payment terms. Private lenders feature a higher rate on the loan amount.
Irrespective of bank and private lenders, the interest on the LAP can change anytime. Depending on the market scenario, the interest rate may increase and decrease.
- LAP with the Mortgaged Properties
Have you purchased a property on loan? You can still get a loan against such property before completing the home loan tenure. A loan against a mortgaged property is possible, and many lenders offer such loans. However, such loans come with some terms and conditions.
You will not get a loan at the original value of the property. Most lenders offer loans against the mortgaged property after estimating the overall price. In such cases, lenders offer 50-60% of the total value of the property as a personal loan.
However, you can increase the loan amount through down payments. If you have made a sizable down payment during a property purchase, your loan amount will be naturally smaller. For such mortgaged properties, lenders offer a higher loan amount.
- No Tax Exemption
LAP does not come with any tax benefits. So, a loan against property is not a good option for those seeking tax exemption against the interest paid for the loan. Therefore, salaried persons do not choose such loans. Instead of LAP, a salaried professional can find personal loans from various other sources. In most cases, you will be eligible for the tax exemption.
But non-salaried and retired persons have limited options for personal loans. Therefore, LAP is a suitable option for such persons. But you have to bear with the drawback of no tax exemption in case of a loan against property.
- Property with Multiple Owners
Can you get a loan against a property with multiple owners? You can find a loan against such properties, though all joint property owners must be loan applicants. If all owners do not apply for the loan against the property, the lenders will void such applications.
What will happen if a co-applicant is minor? Among multiple property owners, there may be a minor property owner. In that case, a power of attorney will represent the minor. If a power of attorney does not agree with the loan application process, other owners cannot apply for the loan against the property.
- Zero Charges on Full or Part Payment
The good thing about a loan against property is that you can make a full or part payment anytime during the loan tenure. In case of the entire or part payment before completing the loan tenure, you do not have to pay any additional charges.
So, these are a few crucial things that one should know before applying for a loan against a property. LAP is an excellent option to obtain a quick and hassle-free personal loan during a challenging period.