Unlock your property’s value even as you use it

A secured loan is one where you use an asset you own to raise funds for your needs. The advantage of such a loan is that the interest rates are lower than an unsecured loan and you can continue to use your asset even while it is mortgaged with the lender.

One such secured loan is a Loan against Property or LAP. If you own a property, be it residential or commercial, you can borrow against it anytime you find yourself short of funds. The property could be your house, shop, office or factory premises.

Say you own readymade garments store and want funds to add to your inventory and expand your business. You can raise funds by borrowing against your shop premises even as you continue with your business.

Or say your son is getting married and the funds set aside are falling short. You can easily raise more money by borrowing against your home, even as you and your family continue to live there, since it is your own residential property.

Thus, LAP helps unlock the value of your property, even while it is being used.

Who can avail of LAP?

Salaried individuals (who are in permanent service in the government or a reputed company), self-employed individuals in business, self-employed professional (such as, doctors, engineers, dentists, architects, chartered accountants, cost accountants, company secretary, and management consultants) with over 24 years of age can apply for LAP. You don't need to be an existing home loan customer of the bank.

Once you submit all the relevant documents, the bank will scrutinise them and conduct physical verification of your property. The bank would check for the type of property (residential or commercial), property registration, market value of the property, loan amount you require, your income, whether you are a salaried or self-employed individual, and your credit score among a host of other aspects before approving the loan amount. The property against which you wish to avail a loan will be offered as collateral (mortgaged) to the bank.

[Also Read: Home Loan Balance Transfer - All You Need To Know]

Since LAP is a secured loan, the chances of it being approved are better.

How much loan can you get?

While approving the LAP, the bank usually applies a Loan to Value (LTV) ratio of 65% in the case of a residential property, and 60% if it is a commercial property. In other words, you could get 60-65% of the prevailing market value of the property as a loan, depending on the type of property. In addition to this, the bank may also set a limit to the loan amount.

The purposes for which you can avail LAP are:

• Personal requirements such as children's higher education or wedding expenses
• Medical emergencies
• For starting a business or growing your existing business

Advantages of LAP:

• You can get a higher loan amount with a longer tenure
• You can get an attractive rate of interest as it is a secured loan
• You can monetise the true value of your existing property by still retaining the ownership

If your requirement of funds is high and have no other liability, then a LAP would be suitable. At Axis Bank, you can get a Loan against Property between Rs 5 lakh and Rs 5 crore with a loan tenure of up to 20 years for salaried/ 15 years for self-employed. To know more visit the website.

Disclaimer: This article has been authored by PersonalFN, a Mumbai based Financial Planning and Mutual Fund research firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & PersonalFN shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.