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Loan against Property (LAP) is a secured loan that can be availed against a residential or commercial property. Your property is kept as the collateral with the Bank / Financial Company until the time you repay back the full amount of the loan. The loan amount can be used for any purpose like wedding, medical emergency or for the purpose of your business.
There are a number of myths surrounding the concept of Loan against Property and so we are going to bust all such myths in this blog:
Myth 1: You can borrow the loan amount equal to the entire property value
When you opt for a Loan against Property you are entitled to receive a loan amount of up to 60%.The valuation of the property is done by the officials from the bank and then the loan amount is given.
Myth 2: You can get the loan only against a residential property
The benefit of Loan against Property can be availed on a fully-constructed commercial or residential property. The only thing that you need to ensure is that the property is free of any litigation and it does not have any existing mortgage.
Myth 3: The usage of the property that you opt as the collateral is not allowed
This is not true from any aspect. You can reside in the house/property that you have given as collateral for the loan. You can continue to operate your business from there if it’s a commercial property / shop.
Myth 4: It is preferable to take a loan with higher rate of interest rather than giving up on your own home as collateral for the loan
It is advisable that if you work accordingly as per a fixed plan of repayment of the loan that you take, then keeping your own home as the collateral of the loan should not be a problem actually. Loan against Property is a very intelligent financial tool that aims at supporting you in the long run and ensures stability.
Myth 5: Loan against property has a high rate of interest
This to some extent stands true, but this is so because these kinds of loans have a high risk of having defaulters and so keeping the rate of interest higher acts as a step of security.