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Loan against Property - Advantages & Benefits

Published On Jul 08 2024 7:02 AM 1 min read 86 views 2504 Likes
Loan against Property - Advantages & Benefits

Secured loans have always been popular amongst borrowers and for good reasons. These are granted against some security in the form of an asset. They are affordable, quickly processed and you can get a higher amount of loan as compared to the unsecured ones. One of the most popular secured loan options is a loan against property (LAP loan). Let’s understand this in detail along with its advantages and disadvantages.

What is a Loan Against Property?

Let’s begin by understanding the LAP loan meaning. Loan against property (LAP) is a financing arrangement whereby the borrower can apply for the loan by providing any property as security against the loan. It is a secured loan option and can be availed at affordable interest rates and flexible tenures.

Advantage of Loan Against Property

Home Loan Prepayment process

Following are some of the significant benefits of a loan against property that make it a preferred option for borrowers:

  • Affordable Loans: As a loan against property is a secured loan facility, you can get loans at affordable interest rates, especially when compared to unsecured loan options.
  • Flexible Tenure: Loan against property offers different tenure options that you can select from. A longer tenure will result in a lower amount of EMI but higher overall interest outflow. Conversely, a shorter tenure will result in a high EMI amount but a lower interest outflow.
  • High Loan Amount: As a loan against property is a secured loan, you can get a high amount of loan if your property value and income support it. Thus, it can be helpful in meeting any financial contingency. It also ensures you don’t have to apply for multiple loans to meet your needs.
  • • Tax Benefits: If you avail of an LAP loan and use the funds for your business purpose, then you can claim a deduction of your interest expense as your business expenditure. This consequently can result in lower interest outflow.
  • Easy to Avail: A loan against property is quite easy to apply. Being a secured loan, lenders usually process the loans quickly and disburse the loan amount. Further, certain lenders allow you to directly apply for the loan online without any hassle.
  • End Use Flexibility: You have the flexibility to use the funds from the loan against property as per your needs. A greater flexibility for end use makes LAP loans quite appealing to borrowers. Whether it's about funding your business, meeting any financial emergency or education needs, a loan against property acts as a viable option.

Limitations of Loan Against Property

Loan against property also carries certain limitations. One of its limitations is that there is a risk of losing the property in case the borrower defaults. Further, the loan against property tax benefits is restricted as you can claim a deduction only if you use funds for business requirements. There is no separate provision under the Income Tax Act, 1961 that provides you with an interest deduction for an LAP loan.

Selecting the Ideal Banker

Home Loan Prepayment process

When you apply for loan against property, selecting the right lender is crucial. You can apply for Shakti Loan Against Property with IIFL Home Loans. It is a specialized loan catering to small and unorganised businesses, that provides easy access to funds to scale up and meet day-to-day operation needs. With the swift approval process, you can get the loan approval in just 30 minutes with streamlined procedures and online documentation. Apply for a loan against property today.

FAQs

Q1: Is credit score important when applying for an LAP loan?

Ans:  

Yes. The credit score is a 3-digit numeric figure that ranges between 300 and 900 and it depicts your credit history and credit behaviour. A higher credit score reduces the risk of the borrower thereby allowing him to sanction loans at affordable interest rates and flexible tenure.

Q2: What is the ideal credit score for availing a loan against property?

Ans:  

A credit score above 750 significantly improves the chances of loan approval as it showcases responsible repayment behaviour.  

Q3: How property value plays an important role in LAP loan?

Ans:  

The property value helps determine the loan amount. A higher property value can help you get a higher loan and vice versa.

Q4: What is the LTV ratio? (

Ans:  

Loan to Value (LTV) ratio shows how much loan you can get against the value of the asset. A higher LTV ratio shows you can get a higher loan amount against your property and vice versa.

Q5: What is the income limit to avail of in a loan against property?

Ans:  

Your income is a main factor in determining what amount of loan you can avail of. Your financial obligations like existing loans also play an important role here. Ideally, you should have enough disposable income to cover the loan EMI while also meeting your personal financial obligations comfortably.

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Disclaimer: The information contained in this post is for general information purposes only. IIFL Home Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment, etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness, or of the results, etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability, and fitness for a particular purpose. Given the changing nature of laws, rules, and regulations, there may be delays, omissions, or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan product specifications and information that may be stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Home/ Loan Against Property/ Secured Business Loan/ Balance Transfer/ Home Improvement Loan/ NRI Home Loan/ Home Loan for Uniformed Services) loan.