There are times in a person’s life where he or she finds themselves in a financial trouble. Loans have proved to be a good way to help yourself in times of such cash crunch and financial trouble. There are various type of personal loan available to take such as car loan, home loan, education loan etc., but the amount of such loan depends according to the person applying for it. Sometimes, due to something in your credit report, the amount of loan might not be enough for all your needs. In such cases, loans against property are a big help. Loans Against Property, or LAP is a loan in which your property, be it commercial, residential or agricultural is kept as collateral against which you are provided with loans.
How to Avail a LAP?
All banks and financial institutions which provide loans provide Loans Against Property. A person who wants to avail a loan against property needs to have a property registered under his/her name. The value of your property is valued against the amount of loan you want sanctioned. You must also be a regular income holder. All your past records of payments are also considered before providing you with a loan. Also, your present debt and savings in the bank will be considered. But fret not, because there are a vast amount of benefits which come with a LAP.
Advantages of Loan Against Property
There are many advantages of a LAP Compared to a normal personal loan. Some of them are-
All major financial institutions look for people who want this type of loan. It is so because a property is a big guarantee if someone wants to take a loan. Hence, with this you can easily secure a loan.
Lower Interest Rates
The interest rate for a loan against property varies between 9.75% to 13.75% whereas for a personal loan this interest rate varies between 11% to 24%. This less interest rate is surely an advantage for those who can avail this loan.
Multiple Purposes and Longer Periods
These loans can be taken for multiple purposes, which is a big advantage as compared to personal loans. Also, the tenure of LAP can be as long as 30 years. A longer payment period translates to a small interest payment each month.
Things to Remember
Opt for a Shorter Tenure Period
Though for some people a longer payment period might seem better, but if you have a stable and a high income, then a short period is good for you. In a long period, though the monthly EMI value is low, but the amount of interest you pay will be less. But always remember that the amount of your EMI shouldn’t exceed 60% of your monthly income.
Don’t Borrow More Than you Need
The benefits of LAP might sway you away and make you borrow more money, but it must be remembered that borrowing more than you need will always get you into trouble. Your interest payments will be higher and you will need more time to pay them back. Always be smart in such situations.
Conclusion- LAPs have loads of benefits, but a smart decision must be taken as to when to A avail it. Always consult with your bankers and family members before availing this type of loan.