Everything You Need To Know About Loan Against Property Interest Rates In India

When you apply for a Home Loan or Loan Against Property (LAP), a loan is made by the lender to the borrower against the mortgaged property. The property’s market value determines your loan amount; the loan provided is a particular proportion of the property’s market value. The Loan Against Property plan is a secured Personal Loan you can obtain by surrendering your property as collateral or security. These types of Personal Loans are also known as mortgage loans. Loan Against Property interest rates starts from 7.25% per year. LAP offers loans of up to ₹25 Crore for up to 20 years. 

What is the Objective of a Loan Against Property?

Loan against property provides low-interest rates and can be utilised for both company and personal finance: 

• These loans can be used for business development, debt repayment, and other legitimate requirements. 
• The loans are simple to get, making them useful for urgent medical finance. 
• The loans can also help with home remodelling, repair or extensions. 
• The loan might be spent if there is a wedding or function in the house. 
• The parent can use this loan to send their child overseas for higher education. 
• Use this loan to support a vacation to a popular tourist destination. 

What are the Advantages of LAP?

A loan against property has several advantages. In times of need, a person might utilise his asset, which is his property, for both commercial and personal purposes. Property loans are completed pretty quickly. There are no fines or costs levied in the event of loan foreclosure. With this, the loan is paid off faster, reducing the borrower’s burden. 

It is a fantastic technique to extend the business by financing the business capital needs with the same property and then expanding the business. It is a simple and effective method of increasing one’s revenue sources. The best feature is that the borrower retains possession of the property and does not have to return the entire loan to regain ownership. If the borrower can’t repay the debt, they might mortgage the land and repay the loan. The borrower may be left with excess funds to invest in the firm. When drawing a large sum, a loan is an excellent option, resulting in a lower EMI choice and a longer loan term. The interest rate is relatively low and it is an effective debt-reduction method. 

Eligibility Criteria for LAP in India 

• The individual must be an Indian citizen or of Indian descent. 
• The borrower must own or rent the property as the primary eligibility condition. 
• The individual must be employed and earn a regular income. He might be a paid employee, a working professional, or a self-employed business owner or entrepreneur. 
• Total income, savings, and financial restraints such as previous debts will all be considered. 
• A strong CIBIL score will assist you in obtaining the loan. 

Home Loan vs. Loan Against Property 

There are several distinctions between the two types of loans. A Home Loan can only be used for the purchase, construction, or improvement of a home. A loan against property, on the other hand, can be used for any purpose, whether commercial or personal. Home Loans have the lowest interest rates. Loans against property are the second most affordable loans in India. A Home Loan is secured by a property you do not yet own. A loan against property, on the other hand, can be taken out against a property that an individual already owns. The loan duration usually is longer for a house loan than for a loan against property. 

Factors Affecting Loan Against Property Interest Rates  

• Tenure: The payback duration of a loan impacts the interest rate imposed by the bank. The greater the interest rate charged, the shorter the payback period. 
• Credit Score: If you want to get a loan against property at a reduced interest rate, you must have a credit score of 700 or higher. 
• Property Type: The lender’s interest rate is determined by the market value and kind of property. 
• The Applicant’s Profile: Factors such as age, occupation, and income, influence the interest rate charged by the bank. 

Conclusion

Before you apply for a Home Loan or a loan against property, make sure to understand the difference between the two. Ensuring you fulfil the eligibility criteria and factors affecting loan against property interest rates to get lower interest rates.