Loan Against Property versus Loan Against Property Flexi Funds: Which One Fits Your Needs?

Are you considering using your property as collateral to secure funds but unsure whether to opt for Loan Against Property (LAP) or Loan Against Property Flexi Funds? Let's simplify it for you.

Think of your property as a treasure chest filled with coins, and LAP and LAP Flexi Funds as unique keys to unlock it. Each option has its own advantages and features.

Let's explore the treasure trove and determine which option aligns best with your requirements!

Also Read: What is Loan Against Property? Features, Eligibility, Documents, and more

Key 1: Loan Against Property

Imagine this scenario: You are the proud owner of a house, an apartment, or a piece of land - your own valuable asset. Now, picture needing a substantial amount of money quickly. In such a situation, you have the option to leverage your property as collateral and obtain a Loan Against Property from a reputable and reliable lending institution.

Once the loan is disbursed, the entire amount is at your disposal, and you begin making equated monthly instalments (EMIs) from the following month until the completion of your loan tenure.

Also Read: 5 Things to Consider Before Applying for Loan Against Property

Advantages of Loan Against Property

Low Interest Rates: Loan Against Property interest rates are often attractive for individuals and businesses alike. Lenders feel greater sense of security in offering loans against some kind of collateral, that is property in this instance. As a result, lenders often provide lower interest rates for LAP in comparison to unsecured loans, collateral-free loans, or alternative forms of credit.

Pro tip: Use EMI calculator to better prepare for your EMI payments and manage your finances efficiently.

Higher Loan Amounts: Secured loans typically offer higher loan amounts, as they are based on the value of your property. If you possess a valuable property, you have the potential to secure a larger loan through a mortgage.

Full amount disbursal: If you require the full loan amount for a long-term or short-term project, a Loan Against Property can offer a convenient solution. With access to the entire amount at one-go, you can utilize it for a range of purposes based on your immediate needs.

No End-Usage Restrictions: You can use the loan amount for various purposes like expanding your business, funding your child's education, or even planning a dream wedding.

Tax Benefits: In India, individuals availing Loan Against Property can enjoy tax benefits on the interest paid towards the loan amount. Under Section 37(1) of the Income Tax Act, the interest paid on LAP is eligible for tax deductions, if the loan is taken for business reasons or for buying a new residential property.

Also Read: I Recently Got a Loan Against Property; am I Eligible for Tax Benefits Too?

Key 2: Loan Against Property Flexi Funds

Let's delve into the benefits of Loan Against Property Flexi Funds – essentially LAP combined with our Overdraft-like facility called Flexi Funds.

Still unsure what an Overdraft is? Essentially, it acts as a handy financial tool allowing you to withdraw funds as needed, providing a safety net for unforeseen expenses. Godrej Capital’s Flexi Funds facility is built on a similar model.

In essence, rather than receiving the entire loan amount upfront, you are granted a predetermined sanction limit. From this limit, you can withdraw funds in accordance with your requirements and pay interest solely on the utilized or the withdrawn amount.

Flexi Funds, as the name implies, offer versatility in both usage and repayment. With funds readily accessible at your fingertips, it streamlines the process saving time. This feature proves particularly advantageous for individuals and businesses seeking a loan facility that provides ready access to a sanctioned amount of loan, but the flexibility to withdraw and repay based on the borrower’s needs and convenience.

Advantages of LAP Flexi Funds:

Interest Rates: With LAP Flexi Funds, you only pay interest on the amount you use, and you can repay it anytime during your loan tenure, when you have funds available. This flexibility can be a lifesaver for small business owners or MSMEs.

Higher limit: LAP Flexi Funds offer access to a loan amount of up to INR 15 crores. No need to apply for a new loan every time you run short on cash.

Flexible access to funds: If you require funds for a short-term project or to address unforeseen expenses, LAP Flexi Funds present a convenient solution. Rather than receiving a lump sum loan amount, you have the flexibility to withdraw only the precise amount needed from your sanctioned limit, while ensuring that a financial reserve is maintained for your future requirements.

Grow your Business: LAP Flexi Funds are a great option if you want to manage business cashflow. Withdrawing and repaying as per your needs makes it an attractive option for business owners who see volatility or seasonal changes in their revenue.

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Which One Should You Choose?

Now that we've explored the uses of Loan Against Property and Loan Against Property Flexi Funds, the big question is: which one should you choose? Well, it depends on your specific needs and financial situation.

• Choose LAP if you need a large amount of money for a long-term project. LAP is also a good option if you prefer lower interest rates and longer repayment periods.

• Choose LAP Flexi Funds if you have short-term cash flow needs or you need access to a financial reserve with the flexibility to withdraw and repay amount based on your needs. This can be to do a quick inventory set-up or a stock piling before the festive season or to manage your business expenses. LAP Flexi Funds is also suitable if you prefer quick access to funds and only want to pay interest on the amount withdrawn.

Also Read: Overdraft Facility and Flexi Funds: All You Need to Know

Practical Use-case Instance for LAP and LAP Flexi Funds

Scenario 1: You want to set up logistics for your company. To set up the logistics, you need vehicles, staff, etc. For a successful set up, you need a bulk amount of funds. Here, Loan Against Property can prove to be very useful. You can secure the loan at a lower interest rate as you are offering collateral against the loan.

Scenario 2: You are running a logistics business that sometimes affect your cashflow during the festive season. To stock up for the season, you need funds to lease more vehicles and hire temporary staff. Here Loan Against Property Flexi Funds can become useful. It will enable cashflow and you can repay the utilised funds as per your convenience. The interest will only be charged on the amount you use.

Godrej Capital Loan Against Property and Loan Against Property Flexi Funds

Godrej Capital, committed to MSME growth, offers both Loan Against Property and Loan Against Property Flexi Funds. Understanding that every business has unique needs, Godrej Capital empathizes with business owners aim for growth and success. Therefore, with unique and tailored loan solutions, you get flexible repayment plans. Depending on your business requirement, you can choose either of the products.

The table below compares LAP with LAP Flexi Funds –

Both Loan Against Property and Loan Against Property Flexi Funds have their own set of advantages and disadvantages. It's important to weigh your options carefully and consider factors like interest rates, repayment terms, and the purpose of the loan before making a decision. Remember, borrowing money is a serious commitment, so make sure you're comfortable with the terms and confident in your ability to repay. Happy borrowing!

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Related FAQs –

Q.1. How does repayment work for Flexi Funds?

Godrej Capital Flexi Funds come with various repayment options. You can choose from monthly, quarterly, half-yearly, or annual installments to bring down the utilized amount. There's also a hybrid option with no deductions for the initial two years.

Q.2. Can I use Godrej Capital Flexi Funds for personal goals?

No, Godrej Capital Flexi Funds are meant solely for business purposes.

Q.3. What is the highest loan amount that can be applied for in Flexi Funds?

Highest loan amount for Flexi Funds is INR 15 crore.

Q.4. What are variants of Flexi Funds?

Godrej Capital offers five variants viz., Monthly, Quarterly, Half-yearly, Yearly, Hybrid.

Q.5. Who can apply for Flexi Funds?

Any individual or entity requiring funds for business purposes and possessing a property can apply for Loan Against Property Flexi Funds.

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com