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Cash emergencies can come knocking at your door at any time. And it is always not possible to have a cash reserve in hand. But, you don’t have to worry because the money is already in your house! Yes, you heard that right. We are talking about your property. Don’t let it sit idle because you can get a loan against your residential or commercial property during sudden cash emergencies. In this post, we will discuss everything you need to know about using a loan against your property, how it can help you during cash emergencies, and also the overall benefits associated with it.
What is a Loan Against Property?
A loan against property (LAP) is a type of secured loan, which you can take against a self-occupied commercial building or a residential building. When availing such type of loan, the primary requirement on the lender’s part is that there should not be any other burden or encumbrance on the property.
It is one of the most secure loans available in the market, and you can leverage it to fulfil different cash flow requirements. LAP clicks with the borrowers as it generally allows them to borrow a relatively large amount of money. It comes with flexible repayment options, has speedy approvals, and has typically easy documentation.
However, because of the structure of lending by lending institutions, the interest rates associated with LAPs could be slightly higher as compared to your traditional housing loans. Since the property is available as collateral, the eligibility criteria for getting this type of loan is quite liberal. And the best part is that the repayment term can range from 5 years to 15 years depending on the loan amount and the lender.
You can use LAP for the following emergency purposes like:
- For funding your new startup or for the expansion of your business
- For funding any critical medical emergencies
- To take care of the wedding of your children
- For funding your children’s higher education in abroad
- Funding a dream vacation with your family
- To buy another property
- Renovating your old property or constructing a new building
The primary reason why people take loans against their property for emergency money is that it comes with end-use flexibility. You can use this loan for any purpose you wish. It works similar to a personal loan but with more flexibility. The loan size is larger, you get flexible repayment periods, the interest rates are competitive, and you will continue to own the property.
Loan Against Property Documents Required
The list of documents you need to present to avail LAP varies across lenders.
If you are a salaried individual; you will need to present the following documents:
- Bank statements of the previous few months
- Salary slip
- Income tax returns of the last 2-3 years
- Form 16 from the employe (optional)
- Your identity proof
- PAN card
- Your address proof
- Proof that the house belongs to you
- Passport-size photographs
You can check the lender’s website regarding what particular documents are required to apply for LAP. Moreover, you can also check your eligibility criteria with the lender.