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Loan Against Property

Advance against property is actually what the name suggests. It is advance allowed against the home loan of property. The credit sum ranges from 40% to 60% of the valuation sum. Credit against property is a verified advance as the borrower ensures that default, assuming any, can be remunerated by his property. The advance residency can be as long as 15 years and the intrigue runs between 12% to 15%. Credit against property can be taken for different reasons:



Working capital requirements


Purchase of machinery


Purchase of commercial property


Closure of existing high-cost debts


Buying a new property


 Education of children


Wedding


In debt consolidation


Any other personal, professional need


LAP is a better option compared to personal loan as the rate of interest is lesser in case of LAP (being a secured loan). 

LAP can be further classified as:


Loan against residential property – this loan can be taken against your residential property that is self occupied, rented or vacant


Loan against commercial property – this loan can be taken against commercial property that is self occupied, rented or vacant


Loan against industrial property – this loan can be taken against industrial property that is self occupied, rented or vacant


Loan against open land – this loan can be taken against open land which can be residential or commercial


Balance transfer – this loan can be availed to reduce the ROI of current running loan by transferring it from the present financial institution


Balance transfer and top up – this loan can be availed to reduce the ROI of current running loan by transferring it from the present financial institution and also giving further enhancement on the takeover loan


Top up – One can get an enhanced or additional amount from the existing financial institution on the running LAP


Some set criteria that are taken in to consideration by the lender are:


Credentials of the borrower (Income, Age, Duration, CIBIL, KYC etc)


Credit history


Other loans that borrower is paying (or liable to pay)


Type and age of property


Since the home loan is generally repaid over several years, lenders prefer that the borrower take an insurance to protect this loan. While planning to avail LAP, one must take in to due consideration:


Cheapest deal (interest rate) may not be the best as there are other aspects to be considered.


 Experts suggest that a floating rate of interest should be preferred over a fixed rate of interest.


Go for a lender who offers a daily reducing balance instead of monthly. This will matter in case you want to make a partial repayment.


Take opinion of others but ultimately understand the mathematics yourself before you take a decision. Other people may not be as wise as you are!

Consider online feedback on lender and mark the oft-repeated problems and good points. Most feedback is credible but some miscreants can try to manipulate to stain the reputation of a lender.


 Consult good professionals like Chartered Accountants, Tax Planners etc.


 Ascertain that the lender will provide good services. Service quality can be a challenge. The product may be lucrative but at the same time services can be a turnoff.


Compare a few top performers and choose the one who suits your requirements best.


Finally, do not let your property be undervalued. It is suggested that you get the best valuation by trying a few options at hand.


A major drawback of LAP is that if borrower is not able to repay the loan fully, the lender can take possession of the mortgaged property.

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