Several aspiring homeowners hold themselves back from taking a home loan against property as they are misguided by the myths about it. While many people believe these myths to be true, taking a loan against property at a good interest rate can make your dream of owning your home a reality!
What is Loan Against Property?
Simply put, a Loan Against Property (LAP) is a secured loan that can be taken as collateral against your residential or commercial property. This loan against property is considered the best for accomplishing financial goals, such as medical expenses, weddings, higher education, etc., as it is available at a low-interest rate and has a flexible end-use.
Now that you know what a loan against property can do for you, let’s have a look at some of the most common myths about it:-
1. The property pledged cannot be used.
People believe that the property they have taken a loan for cannot be used until their payments have been cleared, however, as long as you are paying the EMIs consistently and do not default in payments, you can definitely use the property.
However, if you fail to maintain these payment expectations, the lender or bank can take action and recover the amount by selling your property.
2. Restricted end-use of funds
While many think that the eligibility for a loan against property is restricted to purchasing a home or property, it can actually be utilized to fulfill many other financial needs such as higher education, business or home expansion, weddings, healthcare expenses, etc.
3. Restricted to a residential property
Several individuals do not initiate their businesses due to a lack of funds and property. What many of these driven individuals don’t know is that they can simply apply for a loan against property! It is a common misconception that the eligibility for loan against property is for residential property or a home, however, you can actually also pledge a commercial property, factory, or warehouse when applying for a LAP. Make your career aspirations come true with a simple loan!
4. 100% value of the property can be obtained in the LAP
While many people think that they can get 100% of the property’s value sanctioned in the loan against property, the maximum amount that you can borrow is up to 70 to 80% of the property’s valuation, as approved by the lender or bank. Several factors are taken into consideration such as infrastructure, geographical stability, etc., of the property. You must bear this factor in mind before making the decision to buy a property.
5.You must belong to a high-income bracket to for an LAP
While your income is definitely an essential factor considered when applying for an LAP, you don’t necessarily have to belong to a high-income group. Lenders have a varying minimum income eligibility for the loan against property and consider borrowers from moderate-income brackets too.
6. The collateral’s possession is taken by the lender
Full possession of the property or the collateral stays with you as long as you pay your EMIs on time and do not default on making payments. You must submit your original property documents to the lender while taking the LAP, however, you get them back as soon as you clear all payments for the loan.
7. Loan against property has a short tenure
LAP involves borrowing a larger amount compared to other types of loans. Hence, its tenure is also much longer than other loans, extending up to even 20 years, to ensure you can pay EMIs with no hassles.
8. LAP is risky
The risk of taking a loan against property entirely depends on you. As long as you are sure about your consistent payment capability, you can pledge your collateral with no worries. With minimal risks, a loan against property actually has more benefits including low interest rates, no end-usage restrictions, etc., than risks!
Now that we’ve got these inane myths about a loan against property out of the way, you can go ahead and browse through the new apartments and villas for sale in Chennai, flats in Bangalore, house for sale in Coimbatore, at real estate websites, including Casagrand! Check out the various flat and villa options available to buy property in Chennai at the best price, exclusively at our online portal!