A loan against property (LAP) is a great way to use your real estate asset as leverage to receive the money you need. Here, you can use your property as collateral when applying for financing with a financial organisation.
Loans secured by property typically have cheaper interest rates than unsecured loans that don’t require collateral because the property serves as security. You can choose the LAP choice that best suits your needs from among the several that are offered on the market.
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Kinds of Loan Against Property
1. Loan Against Commercial Property- Any office space, retail location, or industrial property you possess could be considered a commercial property. The money from these loans can be put to use for things like personal debt repayment or business expansion. In addition, you could decide to use the money earned to fund a new business initiative. Interest rates for commercial sectors are more affordable than others due to the nature of their use. But keep in mind that lenders will decide on a loan amount in accordance with the property’s current market worth.
2. Lease Renting Discounting- With these loans, you can obtain money by using rented or leased property as collateral; in this instance, you must give the lender monthly rental receipts.The lender will evaluate your overall cash flow using this information to calculate the loan amount. The lending institution will also take into account the EMI coverage provided by the monthly rent paid. You could get a bigger sum to meet your needs if you choose to take out one of these loans.
3. Loan Against residential Property- You might pledge your residential property to obtain financing, just like a loan against commercial property. The majority of borrowers prefer to use this kind of LAP, particularly in an emergency. These loans’ proceeds could be used to improve your house or consolidate several obligations for repayment.
4. Loan Against Co-owned Property- You can choose an LAP against the co-owned property if your property has two or more co-owners. However, in order to continue with the processing of your application, you must present a No Objection Certificate signed by all co-owners before mortgaging the property. But keep in mind that these guidelines could change based on the lender.
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5. Top-Up Loan Against Property- Such loans, also referred to as second mortgages, may be obtained in addition to any other loans secured by your home. These loans’ eligibility requirements for loans secured by property, however, are stricter than those of other loans. Lenders look at your credit history, repayment history, and other factors before issuing a top-up loan. You can acquire a simple and hassle-free loan approval if you have a perfect credit score and a clean credit history. This also provides advantageous conditions like low fees and a cheap interest rate on loans secured by real estate. Some lenders may offer credit depending on consumption and your employment type in addition to these LAP categories.