Loan against Property is a loan offered by nationalized banks, Private sector banks and NBFCs against commercial and residential property. The loan can be availed for a maximum period of 15 years for the purpose of working capital requirements, urgent or immediate need of the company or the individual or business expansion.
Any immovable property possessed by the borrower can be used as collateral by the bank to give away a loan. Generally, an amount of up to 50-60% of the estimated Market value of the property is the maximum amount banks lend against property; this percentage may vary slightly when it comes to NBFCs. As this is a government recognized loan it's safe and secure and also because you've offered your property as collateral. Through property mortgage loan the borrower can receive a higher amount compared to personal loans.
Loan against Property interest rates
Interest rate on LAP can be fixed or floating based on the terms and conditions applied by the bank or NBFCs. Things that can help the borrower in getting a favorable interest rate will be a good credit score. Also, the interest rates will depend on the type of property mortgaged.
Mortgaging loan against property is an efficient way of raising money cheaply and swiftly. However, borrowers need to be careful in understanding their repayment capacity as the bank or the NBFC can foreclose the loan in case of non-repayment.