There are so many credit products available in the market. Yet, it becomes challenging to decide while contemplating borrowing from financial institutions when there is a need. The reason being most of the loans are end-user specific. For instance, a new construction loan can be utilised only for home-related purposes like construction or purchase of a house, renovation/repair of the existing house, or the purchase of a plot and construction.
Secured and unsecured personal loans are alternative options for multipurpose utility, but they are priced high enough to burn a hole in your pocket. Also, the maximum repayment period permitted for a personal loan is five years which will amount to an increased contribution from your income towards the EMI.
If you own a residential or a commercial property, you can encash the potential of the property by applying for SBI Loan Against Property. You will be able to get a sizable loan amount with a repayment period of up to 15 years. This loan is a multipurpose loan and can be used for any purpose like funding the education of your children, for performing a wedding, for planning a holiday, for debt consolidation, to take the present business to a higher level or to start a new business.
The most commendable part is the pricing. It is priced much lower than an unsecured or secured personal loan. SBI Loan Against Property is available at interest between 8.10% to 9.65% p.a. SBI Personal Loan is priced between 9.60% p.a.to 13.10% p.a.depending upon the product variant.
Hard money investing is a way of investing your money that does not require any type of banking to use. These investments can be used to either generate cash flow or for acquiring a specific asset.
A few benefits of LAP are listed below to understand the advantage of choosing a Loan Against Property vis-a-vis a secured or unsecured personal loan.
Benefits of Loan Against Property
#1. No Restriction on End-use
Like any secured or unsecured personal loan, Loan Against Property is not end-use specific. It is a multi-purpose loan and can be used for any personal requirement except for speculation. Managing Wedding Expenses, purchase of a property, studies abroad, debt consolidation are some of them.
#2. Quick Turnaround Time
A Loan Against Property is a much easier loan to avail of. The approval procedure is not very complicated. It is vital to confirm that the property is ensured and is demonstrated with supportive documents, and there are no pending legal issues with the property. With minimal eligibility terms to comply with and simple documentation, the approval of the loan will be easy and faster.
#3. Rate of Interest
The rate of interest is much lower than the regular personal loans, which make the EMI for Loan Against Property more affordable and pocket friendly. The rate of interest on Citi Bank Loan Against Property starts at 7.20% p.a.which makes it very affordable.
Enjoy a longer tenure up to 15 years with SBI Loan Against Property. You can choose a short or a long tenure, depending on the EMI comfort. The affordable rate of interest and the flexible repayment option make the Loan Against Property the most lucrative funding choice.
#5. Sumptuous Loan Amount
For obtaining a loan against property, you mortgage either a residential or commercial property.
A loan of up to 65% of the market value of the property will be provided. Type of property, location of the property, status of the property (rented or self-occupied) are all factors that impact the loan amount. The lenders provide a significant quantum that will be repayable over long periods. SBI Loan Against Property provides you with a loan amount up to Rs. 7.50 crores, whereas Citi bank Loan Against Property provides you with a loan amount up to Rs. 5.00 Crores.
With the kind of finance available, you will manage big-ticket expenses like performing a wedding, planning a holiday, debt consolidation, repairs and renovations of the house etc. However, you should be prudent to judge the requirement and borrow accordingly. Else, the safety of the leveraged property will be at stake.
#6. Property Ownership
Unlike loans like loans against pledges of fixed deposits, gold, LIC bonds, etc., the property owner will lie with the borrower and continue using the property as earlier. It can either be self-occupied or rented, and nothing will change as there is no transfer of ownership. The borrower will be creating the mortgage by depositing the original documents pertaining to the property.
#7. Tax Benefit
Yet another remarkable benefit of Loan Against Property is the tax benefit. You can claim tax benefits on the interest paid once the loan provided is used for specific purposes eligible for tax exemption.
Suppose the loan against property is utilized for business purposes. In that case, you can obtain a deduction under Section 37(1) of the Income Tax Act 1961 for the interest and processing charges paid by claiming it as business expenses.
Suppose the loan is utilised for any home-related purposes like the purchase/construction of a residential property or repairs/renovations of the existing property. In that case, tax deduction can be claimed under 24(B) of the Income Tax Act 1961 for the interest paid. You can claim a maximum deduction for Rs.2 lakhs. A valid proof for having utilised the amount for the purposes permitted under Section 24(B) must be provided to claim the deduction.
#8. Advantage of a Top-up Facility
A Top-up facility is available for Loan Against Property like the home loan and the personal loan. Under Citi bank Loan Against Property, you can avail of a Top-up facility on the existing loan against the same collateral security. This ensures instant availability of funds as the documentation for availing of the Top-up facility is minimal.
The debt burden under a LAP, whether SBI Loan Against Property or Citi bank Loan Against Property, is lower than a secured or unsecured personal loan as the rate of interest charged is much lower. With the cost of the loan cut down to a large extent, you will manage your cash flow efficiently.