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Resolve Financial Emergencies with a Loan Against Property

Financial Emergencies

A Loan Against Property (LAP) is one of the most effective ways of raising money. Self-employed people, often face a problem while looking for personal loans, even if they sufficient assets and net worth. Loan against commercial property and loan against residential property can be availed by mortgaging a residential or commercial property with a lender in exchange for funds. The interest rates applicable for LAP loans are lower as it involves a proper collateral and longer tenure, both of which work in the borrower's favour. Typically, Banks, NBFCs, and Financial Intuitions maintain a loan to value or LTV ratio of 60-70% of the property value, however, some lenders may offer higher or lower LTVs ratios as well.

Loans against property are not only popular but very easy to avail of since lenders usually trust a borrower who is seeking a secured loan versus a borrower who is seeking an unsecured loan. Loans against property have multiple benefits, such as:

  1. Higher Loan Amount: If you are a self-employed professional looking for a high amount to borrow, chances are that a personal loan application will be rejected outright. Loans against property can help you secure a higher amount of money if you have an appropriate property to mortgage.

  1. Multiple Repayment Options: Repayment can be made in part or paid entirely in advance without any charges. The loan tenure can go up to 15 years instead of unsecured loans that have a tenure of about 3-7 years.

  1. Low Interest Rates: Since loans against property are secured loans, the average rate of interest is much lower than other kinds of loans.

  1. Quick Approvals: Approvals for loans against property are quick and easy, since the loan is secured. Typically, the loan takes 1-2 working days to be approved.

  1. Hassle-free Processing: Loans against property are processed rather quickly because the paperwork is limited and the lender is sure of the borrower's loan repaying capacity.

  1. Part/Pre-payment Facility: Loans against property can be paid in part or in full before the actual maturity date.

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A Loan Against Property is a convenient way to raise funds for business needs as well. Lenders usually don't ask much as long as you fulfil eligibility requirements and keep making periodic repayments. Business Expansion, Plant/ Machinery Acquisition, Project Financing, Debt Consolidation, Lease Rental Discounting, Purchase of New Commercial Property etc. it could be anything. Here are a few ways a Loan Against Property can help you:

  1. Business Expansion: Starting a new business with a massive liability, may never let the business take off. In case of an already established business looking to expand by adding property, machinery, technology, or workforce to the company, loans against property are a boon. The margins from the business can offset the interest payments.

  1. Plant/ Machinery Acquisition: Some industries are very capital intensive due to costly acquisition of machinery and/or plant. In such scenarios, finance for heavy machinery can drain a company's resources and Loans Against Property can help buy/ lease heavy machinery easily.

  1. Project Financing: Some project sizes are larger than what a company can afford and Loans against Property will help finance the large project size.

  1. Buyout Mortgage: In case of a partnership arrangement falling apart, loan against property can be used to raise immediate funds to buy out the stake of the other partner. This finance can help buy properties, machinery or stocks as well.

  1. Debt Consolidation: Sometimes, you may get caught up in multiple small loans with higher rates of interest and lesser repayment tenure. A Loan Against Property will help you service all of the loans, consolidate them into one larger loan and bring your costs down as well as extend your repayment tenure.

Eligibility & Documentation:

These loans are easy to avail since their eligibility criteria are limited and the documentation required is fairly straightforward, the processing is hassle-free and quick. Eligibility to avail a loan is primarily determined by the value of the property being mortgaged and income or repaying capacity of the borrower. Commonly required documents include:

  1. Identity proof of the borrower.

  2. Address proof of the borrower.

  3. Salary slips, Form-16 for salaried people.

  4. Bank statements.

  5. Income tax returns.

  6. Certified financial statements for self-employed people.

  7. Property documents.

A loan against property is one of the fastest ways to raise money. The only drawback of this form of financing is that if the borrower is unable to repay the loan, then the lender can take possession of the mortgaged property. Self-employed professionals can also claim tax benefits such loans. The borrower can also avail of a credit line to service instant expenses. Ensure that you consider your monthly income, existing debts, loan tenure, and your ability to repay before you apply for a loan.


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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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