The concept of taking a loan against property (LAP Loan) is quite common these days. Property loans also have some ups and downs, but there are so many misconceptions regarding them. And it is essential to have genuine information as applying for a LAP loan is a huge undertaking. With the correct knowledge, you can easily get your loan sanctioned. If you are thinking of getting a loan against property, then a few myths and misconceptions are debunked to make a prudent decision. You can apply for property loan here: https://www.fullertonindia.com/loan-against-property.aspx
Today, we will bust three of the most common misconceptions that you might have come across regarding property loans. But first, let us know what a land loan is.
What is a Property Loan?
A mortgage is nothing but a loan secured by an immovable asset such as your residence or commercial property. The lending organization will hold the asset as collateral until the borrower repays the total loan amount. Thus, LAP Loan are secured in nature.
For instance, an individual requires ₹15 lakhs on an immediate basis to recover certain business losses. This is when a Loans Against Property can help you significantly. Using your property as collateral, you can easily get approval for a ₹15 lakh loan for your business. Until you return the entire loan amount, the lender will keep your asset as security.
Misconceptions About Loan Against Property:
Misconception #1: You can’t use your property as collateral for a loan
Reality: You can use your property as collateral for a loan.
Lender organizations will just hold your legal immovable property as collateral until you return their money. For this, you should submit all legal and original documents of your property to the lending organization. There are no restrictions and no policy that states that you cannot use the property as collateral. As long as you possess the property’s original document, you can use it as collateral.
Misconception #2- Your loan can be sanctioned only against a residential property
Reality: Your loan can be approved against any of your assets, whether it is by pledging residential or commercial real estate.
You can keep any of your property as collateral to receive a loan. It’s entirely up to you as to which property you choose.
The following can be used as collateral for a loans against property:
- Residential property such as houses, bungalows, villas, single-family homes, apartments, and condominiums.
- Commercial property such as hotels, malls, retail stores, multifamily housing buildings, farm-land, warehouses, and garages.
So, in a nutshell, any property legally owned by an individual can be used as collateral while applying for a loan against your property.
Misconception #3- Lenders consider the cost price of the property to decide the loan amount
Reality: The cost price of the property does not influence your loan amount
Truth is far from this statement. We all know that property prices increase at a rate of knots each year. That being said, a house bought a decade ago would have a much higher value now. Thus, a property that an individual is planning to sell now would yield excellent profits compared to the property’s initial price. These things are taken into consideration, and thus the initial value does not play a role in your loan application. Instead, the lender would consider the current prices of the property, and the loan will be sanctioned after the property has been thoroughly examined and evaluated.
Usually, your loan amount needs to be around 70-75% of your current property’s value (not the buying value). If this criterion is met and you have all the original documents, your property will be used as collateral, and your loan will be easily sanctioned.
Additional Read: Factors that Help in the Enhancement of Your Home Loan Eligibility
Summing Up
Hopefully, we could add value and debunk some of the common misconceptions about loans against property. Unfortunately, there are many more misconceptions related to Loan Against your Property that need to be busted. If you need more knowledge regarding the process of applying for Loans Against Property, you should head to your nearest financial institution. Also, be sure that you compare all your options to help you pick the right option.