LAP simply denotes a Loan Against Property.
As the name itself conveys, a loan against property (lap) is a loan that you can borrow by keeping your property as a mortgage or collateral with the lender. The property acts as a guarantee for the repayment of the loan and hence is a secured loan. Since the loan against property interest rates are considerably lower, opting for these have become a popular choice in recent years. Banks and financial institutions that offer this facility are quite abundant in number. There is also a LAP emi calculator which people can use and get more detailed information.
As your property is mortgaged with the bank, if you fail to repay the dues, the bank has the right to auction off your property and recover the dues along with the interests.
When can you ask for a loan against your property?
Since loans against properties are generally a large sum of money, you can use the funds for various purposes. It is better to finance the major life events or urgent emergencies that require large expenditure with the help of these loans as opposed to abstract needs that don’t require many funds or where they are not completely necessary to be taken.
You can use these loans for financing the following expenses:
- When you want to go for higher education and the fees are awfully high
- When you need to fund a medical emergency that can cost a large sum of money
- When you want to finance soon to come to wedding preparations
- When you are planning your dream vacation
Even if you can easily take loans against property for wide numbers of reasons, it is always advisable not to take a loan only to finance vacations or trips. You can always save up for the same instead of opting for a separate loan.
What are the top benefits related to loans against properties?
- Low-interest rates: As the loan is borrowed by keeping your property as security, the loan against property interest rates are considerably lower if you compare those with a personal loan. The rates of interest on personal loans are generally between 15% to 25% while loan against property interest rates charged generally falls between 12% to 15%.
- Long tenures: These types of loans are normally available for a longer tenure, sometimes ranging up to 15 years. Thus, it becomes easier to repay large amounts of loan steadily and completely.
- Low EMIs: Since these loans are granted for a longer tenure, the amount of monthly instalment is substantially lower compared to other types of credits and loans. Due to this, a loan against property (lap) becomes a suitable choice for a person who can not afford to bear the burden of large EMIs in addition to their everyday expenditures.
However, it must be kept in mind that the longer you drag out the loan’s repayment, the more money you will consequently pay to the bank in the form of interests. Over the years, this loan against property interest rates accumulates a large debt burden and amounts can be far substantial. So, it is prudent to opt for a moderate tenure for the loan accordingly.
- Easy to secure the loan: As you give your property to the bank as security for the loan, every bank will be more than willing to provide you with this loan. So you will not have to struggle much to find a suitable lender.
- Lower to no prepayment charges: You can easily close your loan against property (lap) by making prepayments towards your loan even before the expiry of the term of the loan. The prepayment charges that are levied in almost every type of loan foreclosure case are not generally levied in case of loan against property.
Which properties can you mortgage for a loan against property?
An owned house where you are currently living as well as a property you have rented out can be mortgaged with the bank for the loan. If you own land, you may also use it as security. However, the property you choose to mortgage must be free from any encumbrances, charges, prior mortgages, as well as any dispute or pending litigation. In simple terms, the title of your property should be indisputable and clear.
There are so many elements that come into play when the bank decides the loan amount: your age, income, the value of the property, and your requirements. The lender generally grants loans up to 60% of the property’s fair market value after the due scrutiny and evaluation of the property in question.