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All about taking loan against property

August 31, 2009 18:21 IST

Want money for your child's marriage? Or to fund your business expansion? Well the money is already in your house! Read further...

Loans generally can be classified as secured or unsecured. Personal loans and credit cards come under the un-secured loans category because we are not pledging any of our assets (collateral) to get the loan. Housing loans, loan against property, loan against shares, and car loans come under the secured loan category as there are collaterals involved.

LAP

Loan against property can be taken against a self-occupied residence or a commercial building. The main requirement on the bank's (lender's) part is that there should not be any other encumbrance.

Lap is the most secure of loans hence the lending rate is generally very low compared to other loans. However, because of the structure of lending by banks, they tend to be slightly higher than housing loans.

The eligibility criteria for getting LAP is also liberal, as the property is available as collateral. The repayment term can also be long from 5 to 15 years.

When to look at LAP?

For anyone who has a house or commercial property and is looking for a loan, LAP should be the first option. The only loan with better features could be the gold loan. But there could be a lot of sentiments attached to pledging gold, so it generally gets done as the last alternative. That leaves the LAP as the better choice.

Though a housing loan and the LAP are secured against the property, LAP is on the existing property and the value of the property is released for productive activity. For a businessman looking to expand business, a LAP comes in handy. As they do not have to look for costly sources and the processing is also much faster. A few banks may even give an overdraft facility against the property; this will help the business as interest will need to be paid only for the amount withdrawn.

Funding children's education can also be done using LAP; also their marriages. But as a general rule, one has to be a cautious when taking loans for expenses.

Advantages of LAP

Some disadvantages of LAP

Points to be cautious about

Loan against property by itself is a very benign loan. So there is not much to be afraid about. However, there are a few points to be cautious about:


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