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A loan against property (LAP) is exactly what the name implies, a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property's market value, usually around 50% to 100%. Loan against property belongs to the secured loan category where the borrower gives a guarantee by using his property as security. The purpose of the loan is not definite; one can use it for personal or commercial as well. In certain bank this product is designed to meet the requirement of entry level entrepreneur, who does not have any track record of business. They can use this product by way of term loan or working capital facility. Purpose of the loan is to encourage SME green field projects which are at inception and because of lack of capital they could not grew. Procedure involves in this product is relaxed a bit and also rate of interest charged and processing fees is quite attractive. Once the loan is availed the same can be converted into a regular limit after certain period and of course, depend upon financial performance of the company.
Loan against Property is a secured loan. If you own Residential or Commercial property you could utilize the value of the same by opting for mortgage loan. The property papers are retained as security for a loan at a much lesser rate than personal loan.
- The ownership of the property is retained by the owner. In case of inability to repay the loan the property could be disposed of to repay dues.
- Loan against property can be taken either for personal or business purpose like working capital, business expansion, repayment of expensive loans etc. Option for an overdraft facility is also available.
- Loan amount could range from Rs.50 lakh to Rs.50 Cr.
- LAP is available from minimum 1 year to a maximum of 15 years.
- Eligibility depends on income and the current market value of the property.
- Rate of interest could be in the range of 11% to 14 % on monthly reducing basis.