Real estate assets always have the potential to cater to your different financial needs. When you need funds, you realise how valuable owning a piece of land is. Trading your property for money is one of the most cost-effective ways to arrange funds. You can use the proceeds from a Loan Against Property for any legitimate reason.
If you are unsure about using a mortgage loan, read this post.
8 possible utilisations of Loan Against Property
1. New business acquisition
India
is aggressively positioning itself as a start-up nation. The
lucrative business ideas and the adoption of modern technologies
might have compelled you to invest in the start-up ecosystems and
expand your existing business. However, the cost of purchasing a new
business is relatively high. You will need sufficient funds to
complete the merger transaction. So, how would you go about securing
the funds? The answer to this question is a Loan Against Property. The higher
loan-to-value (LTV) offered under this financing arrangement ensures
you never miss out on new opportunities.
2. Fighting
medical crisis
Healthcare inflation has the
potential to deplete your bank balance if a medical crisis arises.
These days, treating a minor sickness might cost thousands of
rupees. So, imagine how much it will cost to treat a significant
illness. Even if you have medical insurance for yourself and your
family members, the sum insured may not be enough to cover the
medical expenses for acute diseases. The costs of dialysis, body
organ replacement, cancer treatment, etc., require funds. However,
you won't have to worry about these if you are owning a property.
A Loan Against Property provides you with immediate cash without
burning a hole in your pocket.
3. Debt
consolidation
You may have taken out a loan
during a previous financial crisis at a high-interest rate. You may
have also been denied favourable loan terms when you applied for
your first line of credit due to a lack of credit history. In any
case, you should consider debt consolidation if your credit score has
improved over time.
Debt consolidation is when you take out
a single loan to pay off numerous previous debts. It is ideal if the
burden of multiple high-interest loans is becoming too much to bear.
Utilising a Loan Against Property towards debt consolidation can be
a great idea.
4. Higher education
The desire to pursue higher education comes at a steep cost. In
India, completing your education is considered one of the most
expensive endeavours. If your child wants to pursue an MBA or an
engineering degree from a reputable college, you can expect to pay
between Rs. 20 lakh and Rs. 40 lakh. In the case of MBBS, the amount
may be even higher.
If you face difficulty paying such high
fees, a Loan Against Property can be a suitable alternative. You may
simply mortgage your home to obtain funds. Given the flexible tenure
options, the monthly instalments would also not be a problem.
6. Machinery purchase
You must have the
latest machinery if you own a factory or manufacturing facility to
meet consumer demand. However, purchasing a plant or machinery
requires a significant investment ranging from a few lakhs to a few
crores of Rupees. You may be making a huge financial mistake if you
plan to pay for this with your company's revenue.
In this
situation, a Loan Against Property comes in handy. Sufficient loan
amounts, affordable interest rates, and longer tenures make it one
of the best financing options for businesses.
7.
Home purchase
Another popular reason for taking
a Loan Against Property is to finance a home purchase. Let's say you
possess a property worth Rs. 80 lakh and wish to buy a house worth
Rs 50 lakh. In this case, the lender may release a maximum of Rs. 64
lakh (80% LTV) to you. The benefit
of a Loan Against Property over a home loan is that you don't
have to worry about making a down payment.
8. Secures
retirement
Inflation has urged retirees and even
youngsters to rethink their retirement plans. You may run into
problems throughout your retirement years if you have not put your
savings to good use. But, before you get too upset, consider a
financing option known as a reverse mortgage Loan Against Property.
This is a kind of Loan Against Property that is available to
retirees in which the lender makes a monthly pay out instead of you
paying an equated monthly instalment (EMI). The repayment process is
also different from that of traditional mortgage loans.
Also Read :- Know about property types for a loan against property
Features And Benefits of a Loan Against Property
Now that you are aware of the utilisation of a Loan Against Property, it's time to get familiar with its perks and features.
- High loan amount
A Loan Against Property is backed by real estate assets. It is available against industrial, residential, and commercial properties. The involvement of high worth properties allows lenders to sanction large amounts of loans. Most lenders offer this loan for the value ranging from Rs. 25 lakhs to Rs. 5 crores. The maximum LTV available under this loan depends on many factors. Depending on your profile and the type of property, you might acquire an LTV ranging from 40% to 80% of the property's current market value.
- Lower interest rate
Another benefit of a Loan Against Property is the lower interest rate. The high-value collateral you provide in return for funds almost eliminates credit risk. This is why interest rates are much lower when compared to other financing options.
- Longer tenure
Imagine how hard it can be to repay a debt of Rs 5 crore in three years. The amount involved in LAP is considerably higher. Lenders are also aware that a middle-class person will be unable to afford the EMI of about Rs. 15 lakhs. Therefore, by providing longer tenure, they make repayment easier for you. The majority of lenders offer flexible repayment terms of up to 15 years.
-
Tax benefits
A Loan Against Property offers certain tax benefits. There are no direct benefits, but you may be eligible for a tax deduction if you meet certain requirements. If you are using the funds for a business, you can include it in your profit and loss statement to qualify for section 37(1) benefits. If you are a salaried individual purchasing a home, you can claim a deduction of up to Rs. 2 lakhs under section 24(B).
To Sum It Up
A Loan Against Property comes in handy in almost every situation. However, the ideal time to apply for this mortgage loan is when your requirements are high. If you only need a few lakhs, you can look into other funding possibilities. This is because putting your property in line for the lowest possible rate and minimum loan amount is not a prudent idea. If you default on a loan owing to budgetary concerns, the lender may auction your property off.
So, if your requirements are high or you want to finance any of the situations listed above, you can visit Poonawalla Fincorp and get a loan at competitive interest rates.
