Loan Against Property is also known as mortgage loan. Banks offer loan against a property when the borrower puts a property as a collateral against the loan. Loan against property can be availed by salaried as well as self-employed individuals to finance their personal needs.
You can pledge a commercial or residential property or a plot of land as collateral. The loan will be sanctioned by the bank after evaluating the market price of the property.
When Should I Consider Taking a Loan against Property?
Under the following circumstances, you may think of availing LAP:
- To fund business growth or meet working capital requirements
- To finance a child ‘s education
- To meet family obligations like marriage
- To fund emergency medical expenditure
- Loan money to cover personal expenses like vacation
Features of a Loan against Property (LAP)
- The property acts as the security against the loan thus, you can only mortgage residential or commercial property to avail the loan.
- The bank sanctions 60-70% of the market value of the property as loan.
- The interest rate varies depending on factors like the type of property, the interest rate, tenure etc.
- Funds borrowed against a property cannot be used to purchase land or construct home.
- The loan is granted after the a legal and paperwork verification and after the evaluation of the market value of the property.