COMMON MISCONCEPTIONS FOR LOAN AGAINST PROPERTY

Loan against property or LAP is considered to be most beneficial and most appreciated type of loan, as in this category of loan you can avail a high amount of loan with a maximum tenure limit and also with a minimum interest rate with lowest interest rates by just mortgaging your owned property to the lender as a collateral. These are provided by various banks and financial institutions. But, some people are still not confident in applying for loan against property. There are some misconceptions which people have regarding. This is the right platform for you to clear all your misconceptions

1^st Misconception, that majority of people has is that “the bank takes the possession of the property, when granting the borrowers loan against property”.
Whereas, the reality over here is that, the property which you as collateral remains under your possession only till the loan tenure or till your loan amount is completed. You have to clear this idea that the bank or financial institutions are just asking for your property documents as for their security, but the property remains in your possession only. If you are providing your residential property as your collateral, then it’s not like that the bank will remove you from there, you can continue to live the way you were living till now. Similarly, if you are giving your commercial property where your rented residents are living, then also you can continue to let them stay and earn money from them as rent. The bank has no obligations with whether you are living in your property or do anything with the property, it has no problem until and unless you are repaying your loan amount and paying off the EMI monthly properly.

2^nd Misconception is that, the loan amount which you get is dependent on the price of the owned property”.
Well the reality over here is that bank has its own evaluation process through which they grant you loan amount. There are certain factors which are considered in evaluating the loan amount; every bank has its different policies for that. The general policy which banks follow is that they evaluate the circle rate, age of the property and current condition of the property. Based on such criteria, the evaluator assigns a value to the property you intend to use as collateral. No bank considers the price in which you have bought that property, all that matters is that what the current value of the property is.

3^rd Misconception is that, only your owned residential property can be used as collateral.
Well, the reality over here is that any owned property, either your residential, commercial or an industrial property can be used as collateral. Banks have no objection in considering in any of these above properties. As in commercial properties banks accept borrowers owned plots, shops etc for collateral. However banks accept the collateral property at their discretion and they often apply a higher margin on commercial property, which means lesser loan amount, as compared to residential property.