Loans have become an indispensable part of life. These days, one can avail of a loan for everything. To buy a car, one can avail themselves of a car loan. Home purchases are facilitated by home loans and personal loans can help one take care of their other needs and desires. Loans allow borrowers to pay for things in a slow and convenient manner. Further, they also allow borrowers to keep their savings safe for a rainy day. A specific type of loan that has gained immense popularity over the last decade is a loan against property.

Loans against property are loans secured by collateral, a residential or commercial property, or even a piece of land that legally belongs to the borrower. Loans against property are seen as risk-free loans by lenders as lenders are legally allowed to sell the collateral or the pledged property for loan recovery in case the borrower defaults on loan repayment. However, even if a borrower defaults on loan repayment, the lender cannot sell the pledged collateral without informing the borrower first and giving them ample time to arrange money and save their property. Thus, loans against property are considered a safe bet for both borrowers and lenders.

Borrowers also benefit from other features of loans against property. To start with, under loans against property or LAP, borrowers can avail easily of up to 50% to 60% of their property’s value as a loan. Some private lenders also sanction up to 80% of a property’s value as a loan. Few loan options give borrowers access to such a sizeable loan sanction. Moreover, loans against property draw a low rate of interest and come with a long repayment tenor, which further eases the burden of loan repayment. In this article, we look at the benefits of loans against property in detail.

Benefits of Loans Against Property

1. Low Interest Rates

Lenders see loans against property as a low-risk loan offering, primarily because these loans are backed by collateral and the lender can sell the collateral for loan recovery in case the borrower defaults on loan repayment. It is, thus, that lenders sanction these loans at a very low rate of interest. Currently, loans against property interest rates vary between 8.50% and 18% p.a. If you wish to avail yourself of a low-interest rate property loan, maintain a good credit score, a stable income and job, and a low debt-to-income ratio.

2. Long and Flexible Repayment Tenor

Loans against property usually involve a substantial amount of money and therefore, all lenders give borrowers ample time to repay their loan against property. In general, most lenders give borrowers the option to take anywhere between 15 to 20 years to repay their loan against property. Such a long repayment tenor eases one’s EMI burden and also reduces the stress of loan repayment.

3. Sizeable Loan Sanction

Loans against property or property loans are one of the few loan options that give borrowers access to a substantial amount of money. Under LAP, borrowers can avail of between 50% to 60% of their property’s value as a loan. Some lenders even sanction up to 80% of a property’s value as a loan. Thus, if you need access to a substantial amount of money, availing of a loan against your property may be your best bet.

4. Easy Eligibility Criteria and Simple Document Requirements

Since loans against property are backed by collateral, lenders are quite relaxed about the home loan eligibility criteria. In other words, it is quite easy to get approved for a loan against property, especially if you have a good credit score and the quality of the collateral pledged is good. However, keep in mind that if you want to get approved for a loan against property quickly, you must keep all the required documents ready. Other than KYC, address, and income proof documents, you will also need to submit property documents. So, keep all such documents ready with you.

5. You Can Prepay or Foreclose Your Loan Without Paying any Penalty

Sometimes, borrowers avail of loans against property as they need money urgently to take care of an emergency. Sometimes, people need money only for a few days. If that is the case with you, know that loans against property borrowers who are on floating interest rates can foreclose or prepay their loan at any given time without paying any penalty. However, please note that this is the case only if you have availed of a property loan on variable interest rates. If you are on a fixed rate of interest, your lender can ask you to pay a penalty.

6. Zero End-Use Restrictions

Almost all loans come with end-use restrictions. For instance, one can use the money availed of under a car loan only to buy a car. Similarly, home loans can only be used to invest in residential properties. Property loans are one of the few loan options that come with zero end-use restrictions. In other words, borrowers can use the money availed of under a loan against property to meet all kinds of needs. They can use the money to fund a child’s education or wedding, start a new business, invest in another property, etc. All one must do is honor their EMI commitment and they are free to use the loan money as they like.

7. Property Utilization

If you own a property and you need money, you must avail of a loan against it. Most people do not know that a loan against property does not affect the way you use the property. For instance, if you have taken a loan against a residential property, you can continue to inhabit it. Similarly, if you have taken a loan against a commercial property that you draw rental income from, you can continue to rent out the property, even after you have taken a loan against it. In short, loans against property allow borrowers to enjoy optimal usage of their property.

Final Words

In conclusion, loans against property or property loans offer several benefits and if you are a property owner and need money urgently, you must most certainly consider using this loan financing option to your best advantage.