The loan against property or LAP market in India is forecast to grow annually at over 14%, surpassing Rs.60 lakh crore in terms of value by 2026. This loan type is popular among the masses as it offers a substantial amount against a low-interest rate along with a considerable tenor for repayment. Moreover, the borrower remains the property’s legal owner and can use it throughout the loan repayment period. In other words, the land can be used to generate income even when it is mortgaged.
Individuals can utilise a loan against property calculator to ascertain the amount they can borrow per their repayment capability.
More about loan against property
A loan against property is a secured mode of finance where individuals can avail funds by mortgaging their residential or commercial property. Here, a certain percentage of the property’s value can be availed as an advance.
Property loan interest rates usually have more competitive prices than unsecured loans. Therefore, it is advisable to check for the lowest interest rates offered by NBFCs using a loan against property calculator. These funds also come with no end usage restrictions, and borrowers can utilise them for purposes such as business expansion, a wedding, or as a replacement for an education loan.
To avail the advance, one needs to follow the below requisites.
- For self-employed borrowers: A self-employed individual must submit an ID and address proof issued by the government. They must also submit their account statement for the past six months along with documentation for the property.
- For salaried individuals: Like in the case of self-employed individuals, salaried individuals must furnish identity proof, address proof, and documents for the property to be mortgaged. Additionally, they must provide the latest salary slips and income tax returns.
Many financial institutions let borrowers check their loan eligibility online by way of digital calculators.
Individuals who pre-qualify for the loan can also avail pre-approved offers extended by leading financial institutions. These offers are available on various products, including LAP and home loan. You can check your pre-approved offer by entering your name and mobile number.
Loan against land vs other loan types
Home loan: In the case of a home loan, the amount can be used solely for the purchase of a property, which is either already constructed or to be constructed soon. A LAP loan, however, has no end-use restrictions. It is crucial to learn how a loan against property is different from home loans to avail the right financing option.
Education loan: Unlike education loans, an education loan against property can offer a much higher loan amount at about 70% of the value of a property. Its rates of interest are also much lower, making it a much better way to finance your child’s education.
Benefits of a loan against land
Competitive interest rates: Mortgage loan rates are usually lower than rates for other types of credit since a mortgage is a secured form of borrowing. In other words, it entails minimum risks for the lender, reducing the cost of borrowing.
Obtaining a high loan value: You can avail a sizeable loan value to finance your personal or business endeavours. Lenders provide a range of loan amounts from 70% to 90% of the property’s value, so it’s best to check the loan amount and rates offered using a loan against property calculator.
Tax benefits: If you use your LAP loan for specific purposes, you can obtain certain tax benefits. You can enjoy deductions for using the loan by claiming the interest paid and processing fees as business expenses. You can also get tax deductions up to Rs.2 lakh if you use the funds to purchase a residential property.
Simple documentation process: Since buying a plot of land entails proper documentation, the paperwork involved in availing LAP is minimal.
Attributing to these benefits and others, loan against land has become the preferred choice among prospective borrowers as a viable financing solution.