For most of us, our savings may not be enough to tackle these big-ticket expenses. In such a scenario, a loan against property is the most beneficial option as you not only receive a large quantum of money, which is sufficient for your expenses, but you may continue to enjoy your property during the tenor of the loan without any hesitation.
A low home mortgage loan interest rates offered at marginally by various banks, and NBFC’s as compared to an unsecured loan such as a personal loan, and the tenor of these loans is for a long-term period. To put it simply, a LAP is a secured loan where the borrower pledges their existing property to a lender as collateral to secure a large sum of funding.
Here are some of the benefits of a loan against property:
- The funds that you receive from a loan against property do not have any end-use restrictions and the funds can be used for any purpose, such as travel expenses, debt consolidation, wedding expenses, or education expenses.
- The most beneficial aspect of a loan against property is that you can continue to enjoy the benefits of the property through the tenor of the loan, and once the loan amount is repaid in full, the lender will transfer the property back to the borrower.
- Lenders are less hesitant when it comes to approving a loan against property because the loan is already secured against the property, which in turn reduces their risk factor. If the borrower is unable to repay the loan, then the lender is well within their rights to liquidate the property to recover their losses.
There are three types of interest rates on mortgage loans that you must consider:
Fixed Interest Rate:
The interest rate remains fixed for the duration of the loan, and the fluctuations in the market rates do not hinder the rate of interest. If you are opting for a short-term loan, then you can consider a fixed interest rate.
Read more: All the Factors You Should Keep In Mind While Determining Your Mortgage Loan Interest Rate
Floating Interest Rate:
The interest rate fluctuates according to the market rates and the rate changes periodically based on the Marginal Cost of Funds based Lending Rate (MCLR) and the repo rate. If the market rate reduces, then your interest rate reduces immediately and vice-versa.
Mixed Interest Rate:
Under a mixed interest scheme, you will have a fixed interest rate for a specific period of time, after which it will switch to a floating interest rate.
Loan Against Collateral 