Loan A loan can be a feasible option when someone is facing a financial crisis or needs funds for personal reasons such as medical expenses or expanding a business. A loan against property is a sensible option for those who have property in their name and need substantial funds. This secured loan, as implied by its name, involves using the property as collateral to secure funds provided to the borrower. The lender extends the loan because the borrower pledges their property as security throughout the repayment period.
A loan against property is valued for its lower interest rates and higher loan amounts than unsecured loans. This blog post will delve into how a loan against property can benefit a borrower.
Loan Against Property – How it Helps a Borrower
A loan against property has several benefits that make it an attractive option for borrowers. Here is a list of such advantages: -
- Securing a High loan amount
Securing a substantial amount of money is one of the biggest reasons to get a loan against property. The loan amount is determined based on the property's market value, and can typically amount to up to 60-80 % of the market value of the mortgaged property. This makes it an ideal option for individuals who need a large sum of money to meet their financial requirements.
- Longer Repayment Tenure
A loan against property entails a significant long-term financial obligation. The repayment tenure may range from a couple of years to more than a decade. The longer tenure allows borrowers to repay their loan via comfortable EMIs, without significantly compromising on the quality of their life.
- Low-Interest Rates
Compared to other forms of unsecured loans, a LAP offers lower interest rates. Since the loan is secured by property, lenders perceive it as less risky, resulting in lower interest charges.
- One Loan, Multiple Uses
Unlike specific-purpose loans like a home loan or an education loan, a loan against property offers the flexibility to utilise the funds for various purposes. Whether it is funding a business venture, consolidating high-interest debts, buying a new property, or paying for medical expenses, the borrower can use the loan amount as they require.
- Easy Online Application Process & Timely Disbursal
A borrower can get a loan against property online which is a convenient and time-saving process. Once the lender scrutinises all details and approves the loan following completion of formalities, the amount is promptly disbursed. A bank may take from a week to a little more than ten days to sanction a loan against property.
- Tax Benefits
Under section 24(B), salaried borrowers who have utilised the Loan against Property amount to buy a new residential property may avail of tax deductions on interest payments up to INR 2 Lakhs. Additionally, as per Section 37(1), borrowers who have used the LAP funds for meeting business expenses may claim tax exemptions on the interest component of the loan, the processing fee, and the documentation fee as part of business expenditure while filing the claim.
In conclusion, a loan against property gives borrowers numerous advantages, making it an appealing option for those who need a large sum of money. However, it is essential to carefully consider your financial situation, repayment capacity, and future plans before opting for this secured loan. This can help you harness the potential of LAP to effectively achieve your goals.
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