Top 10 Benefits of Loan Against Property in India

In India, financial needs can arise unexpectedly, whether it's for a child's education, medical emergencies, or business expansion. One viable solution to address such requirements is a Loan Against Property (LAP). This loan allows individuals to leverage their residential or commercial property to secure funds. Let's delve into the top 10 Loan Against Property advantages in the Indian context.

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

1. Lower Interest Rates

The LAP is a loan that is easy to secure. Moreover, lenders incur a lower risk. For this reason, they charge an interest rate that is usually much lower. This means that borrowers can borrow money more cheaply.

2. High Loan Amount Eligibility

Most financiers will advance a substantial loan, usually around 70% of the value of owner-occupied homes. This allows borrowers to fulfil personal property needs or other expenses without necessarily having to sell off these properties.

3. Flexible Repayment Tenure

One of the benefits of Loan Against Property is that LAPs come with longer repayment tenures, often extending up to 15 years. This flexibility allows borrowers to choose a repayment plan that aligns with their financial situation, ensuring manageable Equated Monthly Instalments (EMIs).

4. Continued Ownership and Usage of Property

Even after pledging the property as collateral, borrowers retain ownership and can continue to use it as before. This ensures that one's living arrangements or business operations remain unaffected.

5. Versatile Utilization of Funds

The funds obtained through a Loan Against Property can be used for various purposes, such as:

• Business expansion
• Funding higher education
• Managing medical emergencies
• Consolidating existing debts

6. Potential Tax Benefits

Depending on how the money from the loan will be used, the borrower might get some tax advantages. For example:

If the money lent is used for business, the interest paid can be claimed as a business expense under the Income Tax Act.

When used to purchase another residential property, interest payments may qualify for deductions under Section 24(b) of the Income Tax Act.

Consulting a tax advisor is prudent to get clarity on the particular advantages that accrue.

7. Simplified Documentation and Quick Processing

Given the secure nature of LAP, lenders are more inclined to process these loans swiftly. One of the biggest advantages of a Loan Against Property is that the documentation process is straightforward, typically requiring:

• Proof of property ownership
• Proof of income
• Basic KYC (Know Your Customer) documents

8. Competitive Interest Rates

The low-risk profile of LAP will often attract more favourable interest rates than unsecured loans. This can lead to significant savings over the loan’s tenure.

9. Option for Balance Transfer

Borrowers have the flexibility to transfer their existing LAP to another lender offering better terms or lower interest rates. This can result in reduced EMIs and overall interest savings.

10. Enhanced Loan Eligibility with Co-Applicants

Including a co-applicant, especially one with a stable income and good credit history, can enhance loan eligibility. This can lead to approval for a higher loan amount, catering to more substantial financial needs.

Also Read: Loan Against Property versus Flexi Funds

The Bottom Line

In conclusion, there are numerous Loan Against Property advantages, making it a compelling option for those in need of substantial funds. By leveraging one's property, borrowers can access large sums at competitive interest rates, with the added benefit of flexible repayment options. However, it's crucial to assess one's repayment capacity and consult with financial advisors to ensure this choice aligns with one's financial goals.

Apply for a LAP now to unlock the potential of your property and meet your financial aspirations with ease.

Moreover, use an eligibility calculator to estimate the maximum loan amount for which you can qualify.

FAQs

Q.1. What are the advantages of a Loan Against Property?

A. Since a Loan Against Property is a secured borrowing option with a collateral, a lender's risk is reduced. This is why lenders offer a lower interest rate on this type of loan as compared to other loans.

Q.2. Is there any tax benefit on a Loan Against Property?

A. Salaried individuals can avail Loan Against Property income tax benefit under this section. If you're using the Loan Against Property amount to fund your new residential house, then you are eligible for tax deductions up to INR 2 lakh. The tax deductions are applicable to interest payments.

Q.3. What are the advantages of a LAP?

A. A LAP offers funds in a dependable and affordable manner for many. It is a useful loan, whether one needs it for personal or business-related reasons. One gets lower interest rates, higher loan amounts, flexible payback terms, tax advantages, etc. so that one’s expenses may be managed.

Q.4. What are the merits and demerits of collateral?

A. Loans secured with collateral come with lower interest rates and better terms. This is because such loans are low risk for the lenders.

Q.5. Is a Loan Against Property a good idea?

A. Loans against property are a good idea for those seeking larger loan amounts with more flexibility. However, home loans are ideal for purchasing a property with lower interest rates and tax benefits.

Disclaimer:

The contents of this article are for information purposes only and not 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.