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The advantages of Loan Against Property

Your own property is a prized asset that offers immediate liquidity at key moments in life. People invest in residential and commercial property for a reason – it offers tremendous returns in the future.

Whether you require finance for a personal reason (to pay for emergency medical treatment or to send your child abroad for studies) or a professional reason (to buy new office space or equipment), your owned property can be a useful tool for you. You may lease it out to earn regular monthly income, or you may sell it to raise a large amount of capital. However, a third and more lucrative option is to take a Loan Against Property (LAP).

The biggest advantage of taking the loan against property is that the property is not sold off and you still retain ownership of it. Meanwhile, the loan amount can finance your urgent needs. The property is simply pledged to the bank or financial institution for the duration of the loan. The loan is granted after strict background checks of both the property and the applicant's credentials.

Broadly, the lending institution checks:

Applicant's credentials: Age, annual income, credit history

Property credentials: Ownership proof, registered agreement, share certificates in case of a resale property, chain of agreements in case of a resale property, title deed.

Market value: Current market value of properties in the locality, value of the loan opted for, property value as stated in owner's agreement copy.

Advantages of the loan against property

Purchase another property without selling the previous one. You can make a down payment on purchasing another property using the loan amount, or to renovate your existing home.

No corresponding depreciation in loan amount. Though the property is expected to depreciate in value every year (this has not been the trend across the metros for years now), the loan amount is not calculated basis the depreciation but basis the prevalent market rates. This holds true even during an economic downturn, when property prices normally decrease.

Your credit rating increases.This loan helps to improve your credit rating, provided the repayment cycle is regular and there are no defaults. If you repay the loan ahead of time, your credit score goes up further.

You get immediate funds: The loan against property offers immediate liquidity against the property, no questions asked. You can use this money to fund your personal and/or professional needs. The lending institution does not concern itself with the purpose of taking the loan.