Wednesday, April 24, 2024

Benefits of Choosing a LAP Over a Personal Loan

Do you intend to apply for a loan to meet your personal or professional needs? Are you aware that a Loan Against Property (LAP) allows you to obtain a sizable loan?

What is a LAP?

A LAP is a secured loan that the lender extends to the borrower in exchange for an asset presented as security. By mortgaging collateral, any employee or independent contractor can obtain an LAP loan.

No matter if the applicant’s land is utilized for residential, commercial, or niche companies, the majority of lenders in the market will accept it as collateral for a land mortgage loan.

Is taking LAP a good idea?

A LAP is the best lending option if you own unencumbered residential or commercial property when compared to other loan types. The loan offers a sizeable amount as a loan at a reasonable interest rate and is secured by collateral, which is your property. Additionally, some banks provide LAPs with an overdraft facility. By doing this, you just borrow the necessary amount from your authorized credit limit and pay interest on the borrowed money.

Why is LAP better than personal loans?

Personal loan: Processing times will be quick because collateral is not required. The personal loan will be approved in about a week, but it will have a higher interest rate than a LAP.

LAP: The timeframe for clearance could range from 15 to 30 days (approximately). The lender will check the validity of the property papers before disbursing the loan.

Weightage of loan

LAP: The loan amount for a LAP will range from 10 lakhs to 5 crores, depending on the lending institution’s policies. If you need a larger sum, LAPs are the right choice. Of course, the value of the property will affect how much is borrowed.

Personal loan: Your age, credit score, and other factors, as well as your monthly income, will all have a significant impact on the loan amount. A personal loan up to Rs. 5 lakhs may be offered by some lenders.

Highly flexible loan rates

The interest rates on a LAP are lower than those on personal loans because it is a secured loan. With different lenders, the interest rate could change. The interest rate can be determined using a loan against a property calculator.

The exceptionally long repayment term and impact on credit score

LAP: You can obtain a loan with a duration ranging from 5 to 15 years, depending on the lender and other factors.

Personal loan: The length of your payback period may be between 12 and 60 months.

Your credit score can increase if you pay both your LAP and personal loan EMIs and expenses on time. If you ever need another loan in the future, this will be useful to you.

Hereโ€™s why LAP isnโ€™t always a bed of roses:

Indians typically have an emotional attachment to their homes, which occasionally makes it challenging to sell or mortgage in order to raise money.

In the case of LAP: You run the danger of losing the asset you pledged as security if you fail to make payments on the loan you obtained using your property as collateral.

If it’s a personal loan, the consequences of late payments include an increase in interest. It could also lower your credit rating.

Conclusion

If you need money for your business or personal reasons and have a property that satisfies the LAP processing requirements, a LAP is a smart alternative. The application process for the loan is quick and easy, and compared to other loans, it has a lower interest rate and monthly payment.

It’s a smart idea to look into and compare the fees, margins, and interest rates provided by various lenders before submitting a loan application.

 

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