Loan Against Property
Ownership of a property in addition to be used for the purpose of own residence or business can also be used for the purpose of taking business loans. The business loans are useful for the self-employed people. These business loans can be availed either by the manufacturer of a product or provider of any service. This business loan against property can also be availed by a person who is engaged in trading of goods be it wholesale or retail.
Business loans against property in India are provided by banks and NBFCs both. The rates of interest charged by the banks are relatively lower than those charged by NBFCs. These business loans against property are generally taken for the purpose of working capital needs of the business. In some of the cases the immovable property is secured and provided as collateral for the term loans taken for the purpose of capital expenditures like construction of factory building or purchase of plant and machinery.
These loans against property are generally secured by equitable mortgage of the property. In equitable mortgage the borrower deposits the original title documents with the lender without any further documentation.
The property to be mortgaged for the purpose of taking these business loans against property can either be a residential property or these loans can also be taken against security of your commercial property.
In addition to taking these loans against property, you can also avail these loans for the purpose of meeting any other expenditure like meeting marriage expenses in the family, these loans can also be resorted to in case of any emergency when money cannot be arranged from any other source.
In case of loans against property, the lender normally gets the valuation of the property done to arrive at the valuation figure of the property. The lender will normally lend you around 50% of the value of the property so arrived at by the valuer.
While deciding on the loan amount eligibility, the lender will always evaluate your ability to service the business loan taken. So your loan eligibility will also be constrained by your income. Normally the lenders grant loans equal to your two years income subject to a margin of 50 % of the value of the property.
While granting the loan you need to provide certain document so as to comply with the KYC (Know your customers) norms. This includes your address proof, proof of your income in the form of copy of return of income. In case of salaried employees the form no. 16 will be sufficient.
In case the loan against property is a business loan, you will also be required to submit your projected profit and loss account and balance sheet so as to convince the lender that you will be able to repay the loans and service the loans with the cash flow generated by your business.
These business loans are secured hence the rate of interest is lower than the ones charged for personal loans. Moreover it is relatively easier to get the business loans against property as compared to personal loan. The personal loans are available to only persons working with reputed companies and government employees. The business loans against property are available for a period even upto 15 years but the personal loans are available for a maximum period of 5 years thus the business loans are relatively easier to service as you get a longer repayment period.
The rate of interest on loan against property is around 13% to 16% against the around 16% to 26 % in case of personal loan.
You can either take straight business loan against property or you can use the same as overdraft account and pay for the money used only. In case of overdraft account you just need to pay the interest only and get the overdraft account renewed year after year.
- If the title of your property is be clear and without encumbrances, you are the choice for bank..
Why LAP should be your preferred option?
- Rate of interest is lower than personal loan or loan against any security such as shares, gold etc. slightly higher than home loan. Interest rate range 10.25 % - 14% per annum.
- Income proof of three years
- Easy eligibility - Minimum Age - 24 years - Maximum age - 60 years for salaried & 65 years for Self Employed. LAP available for maximum term of 15 years.
- Repayment by way of EMIs, similar to housing loan
- Pre-payment option available
- Can claim the entire amount of interest paid as business expenses, if used purely for Business purpose