A Loan Against Property (LAP) is when you use your home or business property as security to get a loan from a bank. They usually lend you a part of your property's value, which can be up to 70%. For example: If you own a house worth ₹50 lakhs and need ₹20 lakhs for a business, you can apply for a loan against your property. The bank will provide you with the ₹20 lakhs loan, using your house as security. If you fail to repay, the bank can claim the property to recover the loan amount.
LAP has some myths and misconception let’s clarify these myths in this blog:
Lenders usually sanction Up to 70% of the property's market value as the loan amount. This is known as the Loan-to-Value (LTV) ratio, It makes sure the lender has enough security if the borrower fails to repay.
The LTV ratio varies based on the lender's policies, the property’s location, and its condition. For example, if you have a well-kept property in a good location then there is a high chance to get a higher LTV ratio than an older property in a less attractive location. Knowing the LTV ratio helps borrowers know how much they can borrow against their property.
A great flexibility of LAP that can be used for various purposes such as business expansion, home renovation, wedding, personal expenses, vacations, medical emergencies and anything. That is why most people are considering this option nowadays.
You can get a tax benefit in LAP but there is a condition. If the LAP is used for home renovations or to fund your residential house then only you can avail the benefit up to 2 lakh. The tax deduction is applicable for interest payments. Except from home renovation you can not avail a benefit for anything such as medical, personal nothing.
LAP basically means you give your property to the bank and if you fail to repay the loan the bank has the right to seize your property. There is a misconception about “You lose the ownership” absolutely not. The ownership of the property remains with the borrower throughout the loan tenure. The property is used as security for the loan, meaning it's just pledged to the lender.
Depending on the property's valuation and the lender's policies, borrowers can take a LAP up to 70% of your property value. You can choose whatever loan amount that you want to take. There is no conception that you only take large amounts. It's important to note that taking a larger loan than needed can lead to higher interest costs, so borrowers should carefully assess their funding requirements.
No, usually by understanding your property value and your eligibility things banks offer up to 70% of your property value as a loan. There is no lender available to give a loan 100% of property value.
LAP allows you to retain complete ownership of your property after you repay all the loan amount. As you pledge your property to take a loan there is a case where if you don’t repay the loan amount then the lender will seize your property but if you repay then you will regain the ownership.
LAP offers both residential property as well as commercial property. If you have a commercial property such as a shop, office space or any other you can apply for a LAP and get the loan amount as desired.
Many people see that LAP is a tedious and lengthy process but no, almost every bank offers a streamline process and quick approval time if your documents are ready.
You can use LAP for various purposes not only in case of emergency such as business expansion, home renovation, wedding, personal expenses, vacations or anything. This is the great flexibility of LAP.
Loan Against Property (LAP) is a flexible financing option for various needs like business or personal expenses. By understanding common myths, borrowers can make better choices and use LAP effectively. It’s important to research, compare offers, and seek advice from financial experts for the best results.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
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Yes, you can use a LAP for home renovation, as well as other personal or business needs.
Maintain a good credit score, ensure you have a steady income, and provide accurate documentation to improve your chances.
While a low credit score can make it more challenging, some lenders may still approve the loan at higher interest rates.
Unlike home loans, LAP does not offer direct tax benefits, but the interest paid may be tax-deductible if the loan is used for business purposes.
Yes, but you need to repay the loan in full before transferring the property ownership to the buyer.
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