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Loans against property (LAPs) are secured loans provided by banks, housing finance companies, and nonbank financial institutions (NBFIs). Unlike a personal loan or business loan, these loans usually have lower interest rates and are disbursed faster. Those with pre-owned properties can avail of such loans, regardless of whether they are salaried or self-employed in a business or professional context. Moreover, the loan amount sanctioned is larger than what would be available through alternative options

The demand for LAP is on the rise among individuals for three main reasons:

1. It costs less than a personal loan;
2. Applicants can continue to occupy their properties after the loan is approved;
3. One can use it to fund a child's college education, start a business, or cover unforeseen medical expenses.

      Furthermore, it is not necessary for current customers of banks or housing finance companies to undergo the verification process again.

Businesses and salaried employees alike benefit from a loan against property. The facility is available to the self-employed who need funds for business expansions. Salaried professionals can use the facility to raise funds for medical emergencies that may require long-term treatment, including expensive surgery, or send children to foreign universities for higher education. In addition to leaving one's savings intact, LAPs also offer low-cost EMIs with long repayment tenures of up to 20 years. Low-interest rates make it easier to repay such loans.

All these benefits contribute to the growth and stability of the business or the families of the owners. Property loans are only available for legitimate purposes.

Existing borrowers merely present the necessary documents, while new clients must submit proof of their credit history, repayment capacity, and property marketability. Currently, clients can apply for a ‘top-up’ loan; however, eligibility will depend on factors like repayment history and outstanding balance of their existing mortgage, monthly income, and the loan-to-value ratio. A fresh appraisal is not necessary since the property already has a mortgage.

This is the basic information about a loan against property, but there are other factors to understand. Here are a few:

Loan repayment:

Since the loan amount that is available against the property is high, the borrower must fulfill the required income criteria to repay the entire loan. You can repay the loan over 12 months to 20 years, though the tenure varies from lender to lender. 

Valuing properties:

Essentially, a property loan or housing loan against property is secured by the collateral, e.g., a built house or building. A lender will appraise your property before deciding the eligibility and amount of the loan. This amount will depend on current fair market value, not past or potential future value. Generally, housing finance companies lend up to 50-60% of a property's market value. Your lender should provide you with the loan-to-value (LTV) ratio.

Property ownership:

A lender will approve your loan if your property is clear and marketable. Furthermore, the co-owners must meet the loan requirements.

Tenure:

Property loans usually have longer repayment terms than personal loans. It is a long-term loan with a much lower loan against property interest rates. Low EMIs result in a lower monthly repayment burden with a longer tenure.

Repayment Capacity:

Your income statement, repayment history, and any outstanding loans will help the lender determine your repayment capacity.

Property loans offer greater flexibility, a lower interest rate, more money, longer repayment terms, and greater convenience. Business loan against property offers more long-term benefits than personal loans, but defaults on repayments can result in possession of the property.

Summary

When you require a genuine loan against property, Bhumi finance is always there to assist you. Contact us if you want to compare loan offers from other lenders. You can find additional information on our website www.bhumifinance.com.