Many options are available in the market for a person’s financial needs—loans like personal loans, business loans, or loans against property (LAP). A loan against property is one of them, a secured loan issued against property as collateral. A person who needs financial support or is in need of an emergency fund can opt for the option. An individual willing to start his or her own business can apply for a business loan against property.
There are several benefits of taking a loan against the property, including low-interest rates.
We will discuss a few important things about loans against property, the documents required for a loan against the property, and the benefits one can avail of.
Benefits of Business Loan Against Property
Interest Rate
An individual can borrow cash from lenders at a lower interest rate. The interest is more lacking in loans against the property as the risk of lenders is reduced by having property as collateral and can recover the loss by acquiring the asset.
Longer Tenure for Repayment
Due to the secured nature of the loan against the property, the tenure of these loans is longer. An individual can plan and opt for a business loan against property and can pay as per their ease.
Tax Benefits
An individual can also avail of the tax benefits under section 24 of the Income Tax Act if the loan has been taken to build a house. One can avail of benefits up to Rs. 2 lakhs.
Similarly, under section 31 of the Income Tax Act, benefits on interest amount for a loan can be avail.
A Lower Amount of EMI
Due to the more extended period of repayment in the loan against the property. A person can pay a small amount, and also, there will not be a burden to pay a significant amount every month.
However, it is advisable to take a loan for a shorter period of time due to the extra interest paid against the loan amount.
Ownership
One of the great benefits of securing a loan against property is that the ownership of your asset/property doesn’t change. Even after keeping your property as collateral against the loan, the ownership of the property does not change, and you can continue to use the property further.
Higher Sanction Amount
A person who is willing to start or expand his business will have the requirement for more liquidity. Taking a loan against the property will help to get a good amount of money to be credited depending upon the type of property, whether it is residential or commercial. Banks and financial institutions offer a portion equal to 60-70% of the property’s value. The amount can be used to plan your business financing and other expenditures that requires to run a business.
Disbursement of Partial Fund
An Individual gets an option of partial fund disbursement in a loan against the property. In this feature, an individual can disburse a partial amount as per the business stages and can pay interest only on the disbursed amount. This feature can be very helpful as it will help in saving extra interest amount, and one can disburse the loan amount in multiple phases as per the business requirement.
Approval process
Since the loans against the property are secured, the chances of getting approval for the same are higher, and the process is more straightforward.
Closure Charges
The loan against the property comes with the feature of pre-closure of the loan without paying any extra charges. The loan account will be closed easily.
Things to remember
- Before applying for a loan, calculate your expenditure and apply accordingly. Borrow an amount that you can pay easily so that you do not end up paying more interest on the overall amount than you should.
- Compare the interest rates, tenure, etc., with multiple lenders, i.e., Banks and NBFCs that are available in the market.
Documents Required for Loan Against Property
Any individual who is salaried or self-employed can apply for a loan against the property. Below is the list of documents required for a loan against property:
- Pan Card
- Aadhar Card
- Copy of the documents of the mortgaged property
- Latest salary slips for a salaried person
- Bank account statement for the last three months
- ITR returns
For Self-employed persons:
- Should be an Indian citizen
- Should have the age between 25-70 years
- Need to provide a steady source of income
Other identity proofs are also required, along with documents of the property.
Conclusion
Taking a business loan against property is a better option than the other options available in the market. The amount of the loan, interest rates, processing charges, and tenure are the features that fulfill one’s requirements and enable a person to start a business or expand the business. It is an easy option to finance your business goals.