There
are many times in your life when you need finances to fulfil your
dreams but do not have ready cash available. Setting up a business,
sending your child for education abroad, weddings and home
renovations are just a few of these situations when one can rely on
borrowed funds. For this one can either take a personal
loan or a loan
against property.
A
personal loan is an unsecured loan that is usually given for a
maximum period of 5-7 years, whereas LAP as the name suggests is a
secured loan taken by mortgaging a property. LAP is available for a
maximum tenure of 15 years. Personal loan EMIs turn out to be higher,
because of shorter loan tenure and a high rate of interest ranging
between 17-22%. LAP is a cheaper way of borrowing funds. The EMIs are
affordable as tenure is long and interest rate is lower, generally
ranging between 12-16%. The personal loan amount depends on the
income level and CIBIL score of an individual. Loan amount against
property is based on the property value. So you can make use of an
idle asset and borrow much more funds than you can through a personal
loan. Moreover, if you have a low income or a bad credit history, a
personal
loan for low CIBIL score
may turn out to be very expensive on your pocket. Loan against
property will be an ideal choice in such situations.
Let’s
see the kind of properties that one can mortgage to get a Loan
against property.
-
Self-owned residential property
-
Self-owned and self-occupied residential property
-
Self-owned but rented residential property
-
Self-owned piece of land
-
Self-owned commercial property like shops, office buildings, malls etc.
-
Self-owned but rented commercial property
Factories, warehouses,
schools, hospitals and multiplex buildings also qualify for LAP. One
can also avail for LAP for under construction property that is 90%
complete and being built by an approved builder.
The easiest way to get LAP is
when you have a property with proper maps and plans that are
sanctioned by the town planning authority. Most banks and NBFCs offer
loans for such properties that have a clear legal title.
What if you have a registered
property without map? Since these properties do not have a clear plan
sanctioned by town planning authorities they have some amount of risk
for the bank. With such properties you may need to provide documents
like a proper sales deed and proof of sufficient income, so that you
can gain the trust of the bank.
Is GPA sufficient to get LAP?
General Power of Attorney is a legal instrument that gives an
authority to act on someone’s behalf. The GPA holder does not own
the property. Since he does not have any legal ownership, most banks
and NBFCs do not provide loans against such property. One may try his
luck with private lenders or some housing finance companies who may
do so, but charge exorbitant rates to cover up for the risk.
Can Lal Dora land and
agricultural land be used for LAP? Lal Dora land refers to that part
of the village that is left for keeping livestock. Banks and NBFCs do
not grant loan for such properties. Private lender on P2P platforms
may offer such loans. Loan against property is not provided for
agricultural land as it is not mortgageable.
One of the main requirements
for LAP is that the property should be free from any legal and
financial encumbrances. When
an application for LAP is submitted, bank does a legal check and
valuation of the property. The amount of loan that gets sanctioned
depends on the valuation done. One
can borrow up to 65% of the value of property. Hence, the kind of
property that you put up as mortgage can be a deal breaker or deal
maker when you file your application.
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