Why should you take Loan Against Property?


Among a host of loan options provided by lending institutions in India, a relatively popular product is the LAP or mortgage. The product is popular with the borrowers as it allows them a significantly large amount of money for fulfilling any need. As compared to other loans, it generally has flexible repayment options, speedy approvals, and easy documentation.

A loan against property allows the borrower to avail funding by extending their property as security or collateral. Still, the borrower will have complete authority over the property. In simple terms, the borrower will not lose ownership of the property.

Therefore, there are plenty of perks associated with taking a loan against your property as it can really help you during cash crunch times.

So, why should you take a loan against property?

LAP can be used for any purpose. They include:

  • For the expansion of your business
  • Funding a dream vacation with your family
  • Wedding of your children
  • For funding any medical emergencies
  • For buying another property
  • For funding your children’s higher education
  • Renovating your old property or constructing a new building

Since the lender will keep your property as collateral, it is a secured loan. Meaning, for any reason, if you fail to repay the loan or under your sudden demise, your family is unable to repay the loan, the lending institution has the right to auction your property and recover the loan amount legally.

Why are more and more people taking a loan against property?

There are several reasons to take LAP if you are in dire need of cash. They include:

#1 Lower interest rate

One of the primary reasons why a loan against your property is much better than any other loan is that the loan against property interest rate is quite lower. As compared to personal loans that charge an interest rate of 15% to 25%, the rate of interest of LAP typically ranges between 12% and 15%. The rate of interest is lower for a LAP because the loan is taken keeping your property as collateral. Secured loans have lower interest rates as compared to unsecured loans.

#2 Easy to get

A loan against your property is easy to get as compared to any other loan. Given that you own the property, the lender is more willing to offer you the loan. The lending institution knows that this is a secured loan. They know that they will get their money back. Therefore, the documentation is also quite easy and hassle-free.

#3 Lower Tenure

Since the loan amount will be significantly larger, you will get a longer tenure. Based on the loan amount, the tenure can go from 5 years to 15 years, and in some cases, it can go as long as 20 years. This flexible loan tenure allows you to keep a check on your finances.

#4 Lower EMI

Since the tenure is longer, your monthly payments will be lower. This is best suitable for people who are unable to pay higher EMIs. Lower monthly payments mean there will not be a financial burden on you.

Experts advise that you should take a LAP with a short-term tenure. This is because the longer the tenure, the higher will be the interest charged.