When it comes to arranging capital for your business, you have two options – getting funds from investors or getting a business loan. You can secure a business loan through options such as Term Loans, Start-up Loans, Working Capital Loans, Invoice financing, Equipment financing, Overdrafts, etc.
One of the best options when looking to balance between a high loan amount, long repayment tenor and low interest rate is a Loan Against Property. However, keeping your residential/commercial property as collateral may not be an easy choice for you, which is why knowing the benefits of LAP (Loan Against Property) can help you build confidence in your decision.
1. You do not need to transfer ownership – While you are required to mortgage your property, you need not transfer the ownership of the residential/commercial property while you are still repaying the loan. The property remains under your ownership as long as you are paying the EMIs. Even in the case you miss out on paying one or two instalments for whatever reasons, most lenders will give you a third chance. And even if you miss out on the third one, lenders have their own ways to deal with it before they finally seize your property as a final option to recover their losses.
2. Lower rates of interest – One of the best parts of a Loan Against Property is the rate of interest it comes with. Since LAP is a secured loan, the rates of interest can be as low as 9.75% p.a. (As of Apr 2023) and may vary depending on your credit score and other factors.
3. You get longer repayment period – The repayment tenor of a Loan Against Property is quite long and can extend up to 18 years or so. This gives you ample time to repay your loan and an opportunity to spread a large amount into smaller, payable EMIs. This ensures you do not miss the payments.
4. You get access to higher amounts – One major area where a loan against property becomes a solid option is when you are looking for higher loan amounts. Depending on the market value of your property and the LTV ratio of the lender, you can receive loan amounts as high as Rs.5 Crore* or even more.
5. The documentation and eligibility criteria are not very stringent - Loan against property eligibility criteria are typically easy-going and require minimal documentation. Being secured, the risk to which lenders are exposed is limited, which is why borrowing becomes easy. Having said that, lenders do check your income, age, credit score, and other basic requirements before they extend you the loan. You may be requested to submit the proof of identity, proof of residence and last 6 months’ bank account statements as part of documentation depending on whether you are a salaried or a self-employed individual.
6. You can use the amount as you wish – Now comes the best part, once your money is allotted, you are free to use it as you wish. This facility gives you the freedom to invest the money where you think fit without having to worry about justifying the same to your lender.
The above information intends to provide a business loan option purely from the point of view of Loan Against Property. But it is always recommended to select a business loan based on your personal preference and capacities. Money makes more money – which is why a business loan can be critical to the growth of your business.
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