Top Benefits of Taking a Loan Against Property

A Loan Against Property (LAP) is a type of secured loan that allows individuals to borrow money by pledging their residential or commercial property as collateral. This financial product is widely preferred due to its flexibility, lower interest rates, and higher loan amounts compared to unsecured loans. Whether for business expansion, medical emergencies, higher education, or other personal needs, LAP offers multiple advantages. In this article, we will discuss the top benefits of taking a loan against property.

1. Lower Interest Rates                                                                             

One of the biggest advantages of a loan against property is its lower interest rate compared to unsecured loans such as personal loans or credit card debt. Since it is a secured loan, lenders perceive it as a lower-risk financial product, leading to more attractive interest rates. Generally, interest rates on LAP range between 8% and 12%, whereas personal loan interest rates can go as high as 24%.

2. Higher Loan Amount

Since the loan is backed by a tangible asset, lenders offer higher loan amounts depending on the property’s market value. Financial institutions usually provide loans ranging from 50% to 70% of the property’s current market value. This makes LAP a great option for funding large expenses such as business expansion, weddings, or medical treatments.

3. Longer Repayment Tenure

Loan against property comes with a longer repayment tenure, which can extend up to 15-20 years, depending on the lender’s policies. This long tenure allows borrowers to opt for lower EMIs, reducing their monthly financial burden and making loan repayment more manageable.

4. Multipurpose Loan Usage

Unlike home loans or education loans, which come with specific usage conditions, a loan against property can be used for multiple purposes. Whether it is for personal needs, medical emergencies, business expansion, debt consolidation, or even funding a child’s higher education abroad, LAP offers unrestricted usage.

5. Quick Loan Approval & Disbursal

With digitization and streamlined processes, financial institutions ensure faster loan approvals and disbursals for LAP. If all the required documents are in place, the loan amount can be disbursed within a few days to a couple of weeks, making it a great option for urgent financial needs.

6. Retain Ownership of Property

Unlike selling a property to raise funds, LAP allows you to retain ownership while utilizing its financial value. The borrower can continue using the property for personal or rental purposes while benefiting from the loan.

7. Balance Transfer Facility

Many banks and financial institutions offer a balance transfer facility, enabling borrowers to shift their outstanding LAP to another lender at a lower interest rate. This helps in reducing the overall repayment burden and making loan servicing more cost-effective.

8. Tax Benefits

Though LAP does not offer direct tax benefits like home loans, borrowers can still avail tax benefits if the loan amount is used for specific purposes, such as business expansion or property renovation. Under Section 37(1) of the Income Tax Act, expenses related to business expansion using LAP are tax-deductible.

9. Minimal Documentation

Unlike other financial products, a loan against property requires minimal documentation, such as proof of identity, income proof, property documents, and a few other necessary papers. This makes the loan application process hassle-free and less time-consuming.

10. Improves Credit Score

Regular and timely repayment of a loan against property can significantly improve your credit score. Since LAP comes with structured repayment options, it provides an opportunity for borrowers to maintain a healthy credit history, which can be beneficial for availing future loans at better terms.

11. Flexible Loan Repayment Options

Most lenders offer flexible repayment options, allowing borrowers to opt for customized repayment structures based on their financial situation. Some institutions even offer overdraft facilities, where interest is charged only on the utilized loan amount.

12. Better Financial Planning

Since LAP offers low EMIs and longer tenures, it enables better financial planning. Borrowers can allocate funds towards other investments while repaying the loan, ensuring a stable financial future.

Conclusion

A loan against property is an excellent financial tool that offers multiple benefits, including lower interest rates, higher loan amounts, flexible repayment options, and unrestricted usage. It is an ideal choice for individuals looking for substantial financial assistance without liquidating their assets. However, borrowers should assess their repayment capacity and compare lenders to ensure they get the best deal. If you own a property and need a large sum of money, taking a loan against property can be a strategic financial move, offering liquidity while retaining ownership of your asset.