A loan against property (LAP) is a popular tool for borrowing funds against an immovable property (land, residential property, or commercial property) for numerous uses. A recent study showed that the India LAP market is expected to grow at a CAGR of over 14% to touch USD 857.87 billion in value by FY2026.
These loans are sanctioned based on various factors, including the kind of property pledged, credit score and income of the borrower. While most lenders require income proof for approving a LAP, some also grant a loan against property without income proof. Read on to find out the benefits of a LAP, and how you should go about applying for one.
Benefits of Availing of a Loan Against Property (LAP)
Lucrative Interest Rates
The interest rates on LAP are generally on the lower end of the spectrum compared to other forms of loans. With a LAP, you may even get some of the lowest rates in the market. Moreover, some of the most reputed lenders in the market, such as Bajaj Housing Finance Limited (BHFL), offer loans against property with quick processing and disbursal.
The interest rate applicable on a LAP depends on the borrower’s profile, credit score, loan duration, property pledged, etc. To find out interest rates and EMIs on a LAP, you can use the loan against property interest rate calculator. Additionally, there are low or nil foreclosure charges attached to a LAP, so one can be stress-free about repaying the loan.
Freedom of End Use
A notable benefit that comes with a LAP is the fact that the borrower has complete freedom to decide the end-use of the borrowed funds. Once you fulfil the loan against property eligibility criteria, the lender is not concerned about how you wish to use the borrowed funds. Thus, you can use a LAP for numerous purposes ranging from marriages to medical emergencies, home construction and business expansion. Keep in mind that it’s imperative for you to repay the loan on time, lest you should pay late payment charges or reduce your credit score.
LAPs are seen as tax-saving instruments due to the various tax benefits associated with them. This is a significant benefit as it can result in notable amounts of savings. You can get the following tax rebates with a LAP:
- If you use the loan for business, you can claim deduction on interest payments under Section 37(1) of the Income Tax Act.
- If you use the loan for home financing, you can claim deductions on interest payments and principal repayments under Sections 24, 80C and 80EEA of the Income Tax Act, depending on your eligibility.
In case of urgent requirement of funds, time is of the essence. One of the biggest benefits of a LAP is the quick approval and easy disbursement process. As a LAP is a secured loan, lending institutions typically process it faster than other types of loans. For instance, if you apply for the Bajaj Housing Finance loan against property, you can get approval on your application within 24 hours after you submit the required loan against property documents.
It is also very easy to apply for a loan against property. Several lenders offer a simple online application process for LAPs. Another benefit of this financing instrument is that reputed lenders like BHFL also extend the facility of loan against property without income proof.
Furthermore, LAPs also offer the benefit of minimal documentation. Thus, you get the advantage of quick disbursement of funds, which is crucial in the case of emergencies.
High Loan Amount
In loans against property, the loan amounts sanctioned are generally higher than most other types of loans. Unlike other types of loans, there is no fixed upper limit to the amount you can borrow through a LAP. Lenders can approve an amount ranging from 60% to 90% of the property’s market value. Thus, you can avail of high value funding depending on your property’s value. Nonetheless, you must choose your loan amount based on your fund requirement and repayment capability. A loan amount that’s too high might end up causing you financial problems. To ascertain the financial viability of your loan amount, you can calculate the EMIs using the loan against property EMI calculator.
Loan against property extends several benefits to the borrower such as attractive interest rates, extended tenors, easy approval process, quick loan disbursement, freedom of end-use, tax benefits, flexible repayment plans and high loan amounts. Additionally, a property owner can also avail a loan against property without income proof. These reasons make LAP a highly attractive tool for borrowing funds for individuals who own a property.