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Tips & Advice

Things To Remember Before Applying For Loan Against Property

When hit with a financial emergency, most people consider redeeming their investments or taking out a loan. Although a loan may be a preferable option in a financial crisis, selecting the proper type of loan can be difficult with so many options available. When considering the various loan choices available, many people fail to recognise that their property has financial value! When you need to borrow large quantities of money, a loan against property, or LAP, might be a suitable option. [B-01] A loan against property is an arrangement where the lender provides the borrower with a quantity of money in exchange for his property kept as security. As a result, the loan can be deemed secure. Keep in mind that the collateralised property can be either commercial or residential, and the borrower can continue to inhabit it even after the approval of the loan. However, before you begin applying for a mortgage loan, consider the following vital ideas that assist the application process and simplify loan payments. 1. Determine the property’s value Your lender will assess your property before determining your loan’s eligibility and amount. The sum will be determined by the current market value, not by the previous or projected future worth. 2. Consider the criteria for eligibility The eligibility conditions will vary depending on the lender. However, before applying for the mortgage loan, you must understand this, remove the possibility of rejection to guarantee the loan amount you desire. 3. Choose a reputable lender It is critical to select a reputable organisation to obtain a loan. Banks, both public and private, are dependable organisations. You may be confident that they would take good care of your property records that you leave with them as mortgage security. Always get your loan from a government-regulated financial institution to avoid loan sharks. 4. Examine interest rate charged The affordability of your LAP gets decided by its interest rate. Thus, if you want to keep your EMIs low, choose a loan with a low loan against property interest rates. 5. Obtain an estimate of the amount you need If you don’t have an estimate in mind, it’s tough to borrow the proper amount as a loan. Make a list of the costs to gain clarity. After you’ve made a list of your financial needs, go through specifics such as your monthly income and spending, this will assist you in reviewing your finances and help select a loan amount that matches your demands and is appropriate for your financial position. 6. Be aware of the additional benefits and services provided by your lender Your lender may provide you with value-added services that increase the loan’s worth. To optimise your borrowing experience, inquire about these options. 7. Look for processing and additional fees Processing and other loan expenditures are costs that many borrowers overlook when estimating the overall cost of the loan. Some lenders may levy service fees, prepayment penalties, and statutory penalties, in addition to the stamp duty required by state law to obtain the loan against property. 8. No eligibility for tax rebates A crucial consideration is that, unlike other loan types, such as school or housing loans, a loan against property does not qualify for tax deductions. You will have to pay tax on the money you use to repay your loan. 9. Never go beyond your monthly budget If you ever take out a loan, you will be concerned about repaying the money. Making and sticking to a monthly budget is a terrific method to keep worries at bay. [B-02] Conclusion: As a property owner, taking out a loan against your business or residential property is a terrific way to get the financial help you need. You not only acquire a type of secured loan
08-11-2023
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All About Small Business Loans In India

The small and medium-sized enterprises in India, popularly known as SMEs, are the backbone of the nation’s socio-economic development. According to several reports, the SMEs have employed millions of Indians and contribute 30% to the nation’s GDP, making it extremely crucial for the country’s development. Despite having enough growth potential, the SME sector tends to lag majorly due to a lack of funds and other difficulties. To cope with this problem, the Government of India has come up with the idea of small business loans for budding entrepreneurs and potential businesspersons to help this sector grow. [B-01] Key features: 1. Faster Approvals: A businessperson, either small or big has many tasks lined up to be completed. In this case, running around the city to get his business loan sanctioned can be challenging and tiring. To avoid this situation, small business loans are approved comparatively faster than any other loans, and the quick and hassle-free process takes care of the individual’s convenience. 2. Provision of unsecured loans: A secured business loan is a loan against property. Still, the small-scale businessmen who do not have collateral to offer can now opt for unsecured business loans that provide funding without security. However, only some banks have the provision of unsecured business loans due to a high-risk factor. 3. Easy assessment: To save the individuals from the hassles of visiting several banks and offices while learning about the schemes, all the plans are available online. Now a business person can analyze them easily. 4. Minimal documentation: One of the major features of a small business loan is that it requires minimal documentation and gives pace to the process to make the business avail of the funds as soon as possible. Moreover, top banks provide dedicated 24/7 support to their clients to help them with their queries. Small business loan schemes available in India: 1. MSME business loans: A small business loan scheme that is launched by the government to provide financial assistance to both the upcoming and prevailing businesses of the country. The purchaser can opt for a loan amount up to INR 5 lakhs at interest rates starting from 8.5%. This loan gets approved within a very short time of 59 minutes. However, it takes up to 8 days to complete the process.Eligibility: Any businessman or entrepreneur can apply for a 59-minute loan. 2. Mudra loans: With the concept to “ fund the unfunded”, the MUDRA loans are offered by the Micro Units Development and Refinance Agency of India to help the micro and small businesses grow. MUDRA loans can be purchased from all the branches of public and private sector banks, regional rural banks, and corporate banks.Eligibility: Partnership firms Public companies Small food processing units Manufacturing units Private firmsAll other legal entities like these can apply for a MUDRA loan. 3. Credit Guarantee Fund Scheme for MSMEs: A small business loan scheme launched by the government of India wherein there is no requirement of collateral to avail the funds. This provision of unsecured loans can be availed by both the prevailing and new business entities that fall under the MSME category. This scheme offers working capital loans up to INR 10 Lakhs.Eligibility:The following can apply Retail traders Educational institutions Training institutions 4. Credit Link Capital Subsidy Scheme for Technology Upgradation: This CLCSS scheme is a government-designed business loan that will help business people upgrade their technologies by financing them. This is a credit-based scheme especially launched for the betterment of businesses based in rural and suburban areas. Under the CLCSS plan, individuals can avail of a 15% subsidy on eligible equipment.Eligibility:These are eligible to apply Sole proprietorships Partnership firms Private, public, and cooperative companies Business loans with Piramal Finance: Piramal Finance has been financing the dreams of Indian citizens for over 40 years and has gained enough trust and goodwill over time. With Piramal Finance you can purchase a customized business loan most quickly and easily that will take your business to another level. Here’s how you can get a business loan from Piramal Finance: Visit the company’s official website and read about the features and benefits of business loans Once satisfied click on the “Quick Apply” button and fill in your details on the next page. Submit the information and wait for an official response to get started. [B-02] Conclusion: The SME sector still has much more to achieve and these affordable government launched schemes will fuel them financially. Now, every potential Indian businessman can easily assess and buy the best-suited business loan online.
08-11-2023
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Pros & Cons Of Taking A Debt Consolidation Loan

Having a debt consolidation loan is like having all your worries in one box. Since, debt consolidation combines multiple streams of debt like, medical bills, personal loan, business loan, high interest credit cards etc., into a single monthly installment. To lower your annual percentage rate, getting a debt consolidation loan can make sense. This makes a consumer have less interest payment and potentially step out of debt in a relatively lesser period of time. However, refinancing debt can have its own upsides and downsides even at lower interest rates. [B-01] Understanding Debt Consolidation Loan Debt consolidation is the process of getting a new loan and using it to pay off old obligations. Debt consolidation loans are usually recommended for people who have a lot of unsecured debt to pay off. These loans could be through a variety of credit cards, personal loans, or private money lenders. Taking a debt consolidation loan can help you save money on your monthly payments by lowering your interest rate. As you might expect, customers who are behind on their payments may find this option appealing, especially because it results in a lower interest rate. In many cases, to ensure security, customers get secured debt consolidation. A secured debt consolidation loan is one in which the person receiving the funds pledges an asset to the lender as security, such as a car or property. As a result, if you own a home, automobile, or other piece of property, you can take out a secured loan against it. In Many other cases, business loans are also paid off by the mechanism of Business loan debt consolidation. Pros Of Taking Debt Consolidation Loan Lower Rate Of Interest: The major reason for debt consolidation is to lower the overall amount of EMIs that must be paid. This is accomplished by taking out a loan with a reduced interest rate. This saves you a lot of money that you would have spent on interest otherwise. Easy Management of your Debt and Simplified Finances: Debt consolidation is a tried and true method of reducing financial stress. Making a proactive plan to address your financial issues and combining your existing debt makes your loans much more manageable. Better Credit Score: Getting a debt consolidation loan is a great way to get out of debt. Reduce your credit use ratio, and your credit score will improve. By consolidating several debts, you can lower your credit utilisation score by utilising less of your available credit and, as a result, increase your credit score more rapidly. Cons Of Taking Debt Consolidation Loan Could Lead to Expansion of Debt: A debt consolidation loan taken without sufficient planning and study can have a detrimental impact on your finances. This can only happen if you are unable to properly handle your new loan. To ensure that everything falls into place, you must prepare for the repayment of your new loan before you take it out. Reduction in Savings: Debt consolidation loans are used to save money that would otherwise be used to pay off debts. However, you should not put your faith in any debt consolidation loan. To maximise your savings, conduct thorough research, analyse all available options, and calculate the overall borrowing cost. Even if you choose a low-interest rate, you will spend the same amount of money over the course of the loan. Prepayment Fees can add up to a Lot of Money: Taking out a debt consolidation loan allows you to pay off your previous debts. This implies you may have to pay your present lenders pre-closure fees. This can detract from your enjoyment because it will be added to the total cost of debt consolidation. As a result, it’s critical to check with your current lenders for pre-closure options. If the amount is more, it is preferable to keep the loan with the same lender. But don’t make any decisions until you’ve calculated everything. [B-02] The Bottom Line Debt consolidation is a very helpful mechanism to those dealing with multiple loans. It single handedly pays off all your smaller loans with lower interest rate and at a more comparatively lesser time. Consolidation of your debt is a crucial financial issue, where a decision has to be taken, while keeping various calculations and assumptions on unforeseen events in mind. It’s up to you to weigh the above pros and cons in accordance with your financial situation. Visit Piramal Finance (PCHF) for more information!
08-11-2023
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Working Capital Management In A Post-Covid World

Is your company struggling to maintain its cash flow in this period of economic uncertainty? Then, you must be vigilant about your working capital and properly manage it so that your day-to-day transactions run smoothly and liquidity is optimum. What is meant by–Working Capital and its Management? Working Capital, in its basic sense, is the difference between the company’s Current Assets (which include cash in hand, expected payments, raw materials in stock, and finished products) and its Current Liabilities(debts and account payables). It denotes the liquidity scenario of the company to manage its day-to-day expenses and describes the company's efficiency and financial health. Working Capital Management is the dedicated task of managing working capital to ensure that all the company's day-to-day transactions run smoothly. How has Working Capital been affected in the post-COVID world? The pandemic has adversely affected the financial transactions of the companies; the supply chain system has been disrupted, and the Client is delaying the payments. In these uncertain circumstances, companies are trying to slash the pay of employees, delay the payment of their supplies, and cut down variable expenses. All these factors pose a threat to working capital management and create room for companies to look for capital financing options. As a thoughtful businessperson, you must be thinking about the measures you need to take to manage your working capital in these financially stressed times. Read ahead to learn about all the measures you need to take. Working Capital Management strategies will be followed for smooth business transactions post-COVID. Inventory Overhaul: In the post-COVID phase, consumer demand has been variable, and supply and logistic services are less efficient, which means all these factors call for proper inventory management. An appropriate business strategy in these uncertain times would be to maintain the balance between the just-in-time and just-in-case approaches for inventory management so that you do not spend more on idle inventory, but at the same time, you should maintain sufficient stock to evade potential losses. Maintaining high inventory involves additional warehousing, insurance, and transportation costs, which eat up the working capital, so your company should resort to judicious and real-time demand forecasting strategies based on updated statistics. Business Process Restructuring: In the post-COVID world, the delay in supply chain functions, variable government regulations, and the liquidity requirements of all organizations have all resulted in the delay in client payments. So, you need to expedite your pending payments to maintain optimum working capital and manage your outflow. In this digital age, companies are now resorting to electronic invoicing systems to help streamline payments and keep a digital track of receivables. Similar processes should be incorporated into various functions to properly manage the cash flow. Deploy Robust Forecasting Framework: Since market forces are dynamic after COVID-19, you need a robust forecasting system to efficiently predict unplanned cash requirements and other variable short-term and long-term capital financing requirements. If the forecasting system is realistic, you can accurately predict your receivables and working capital requirements. Capital management should be optimal, neither too low (which affects the company’s operations) nor too high( which reduces the chances of earning returns on unused funds). Keep doors open for Additional credit sources like capital financing and working capital loans: Businesses need to keep track of the market scenario, and if the situation arises, doors should be kept open for additional credit sources. Sufficient cash flow should be maintained at any instant, so vital functions are not hampered. Based on the requirement, you can choose from various capital financing options, such as a working capital loan or capital loan. Extending a helping hand to your business drivers: The levels of uncertainty are distributed among the businesses based on their financial capabilities, which causes small businesses to be more affected by the changing market conditions. So, it’s the moral obligation of strong businesses to support their Supply chain partners by facilitating timely payments and providing continuous supply orders. If these small companies are in a cash crunch, they should also take the support of capital financing services. [B-02] Looking Ahead Challenging situations not only pose dangers, but they also give companies a chance to showcase their strength and come out stronger with flying colours. This post-COVID situation also provides them with an opportunity to think outside the box and to develop new dynamic business models and more efficient supply chain functions.
08-11-2023
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Tips & Advice

Financial Habits To Better Manage Your Business Growth

Habits make a man. At least you have heard so all your childhood. The need for good habits is so vital that your entire personality depends on them. The same applies to business owners. Financial habits make or mar your business. Despite having the best resources, entrepreneurial abilities, and strategy, several business owners fail to adopt the right financial management habits. What do Business Owners consider as Growth? Not many owners realize that adapting to the right financial practices and habits ensures steady growth. Growth in business does not mean mere profits and numbers. If you own a small business, you might want to measure growth by the categories of customers who keep coming back, the demand for your products or services, loyalty in the markets, and the reputation you build over some time. This might not seem easy to achieve, but adapting a few essential habits will help you get there—over time! Review your Finances While your business will have difficulties, you must understand the “pattern” of your expenditure and earnings at the outset. Decide if you need a business loan, a loan against property for your business, or a secured business loan; based on the review of finances Check up on seasonal changes in the pattern, if any. Ensure you understand where the maximum income generation is happening while tracking the loss areas. Monthly reviews will be the right target to set. You have to understand how well your business is operating before sniffing out the weaker bits of operations. Maintain and Manage the Business Budget It is vital to have a budget. It gives you a goal and a limit. While limitations must not pull you down financially, setting a goal (with an upper limit) is motivating. This helps you track your profit and expenses throughout the month. It also allows you to understand what aspects of your business need improvement. Once you set the budget, indulge in end-of-month comparisons with the business results. Budgeting gives you the power to understand the problem areas of your business. It also helps you make informed decisions. Tackle Taxation, Liabilities and Debts Discipline your business dealings before it's too late. It makes no point earning premium profits if your liabilities, debts, and loan ratios are not declining. Save ample money to pay taxes. These must be paid on time. The penalties for missed payments can negatively influence your business. Engage in debt reduction. While short-term debt fuels business growth, you need to ensure that you reduce it to the minimum. Unnecessary debt is not advised. Work on repaying business loans quickly. When picking a business loan, research the market to understand the best bet for your needs. Piramal Finance is a reputed name that offers a wide array of business loans. Both big and small businesses can benefit from a variety of loan products. The top business loan options available with Piramal Finance are- Secured Business Loan Business Sarthi Debt Consolidation Loan Working Capital Loan Do not Swipe Cash. Get a Salary instead Most business owners make the mistake of swiping off money as per their requirements directly from the business cash box or account. This will ultimately contribute to a miscalculation in revenue consolidation and profit assessment. Keep a chunk of earnings set aside for your personal needs. Consider this as a “salary” of sorts you pay yourself! This way, the expenses stay in check while ensuring your business is transparent. Understand the Priorities for Business Structure As a business owner, you have to judge your business's needs. Sometimes, a business loan pumps more funds into the business, making operations faster and smoother. Again, sometimes, debts slow down business profits, and you need to repay them quickly. These decisions need to come from situations your business sees. You cannot strategize ahead; you can only observe and take action. You simply need to understand the priorities best suited to your business's structure. [B-02] Conclusion: Adopt such financial habits for heightened business growth and better business results. Just adopting these habits will not help. You need to focus on them and stay true to them.
08-11-2023
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Myths

Common Myths About Loan Against Property

When it comes to property matters, most Indians prefer discussing things with their friends and family members rather than seeking the guidance of a professional or an expert. This often leads to false truths and confusion on these crucial matters. One such field where there are too many myths floating is loan against property. If you are in financial distress, it is likely that you are exploring LAP, a loan against property, but you need to bear a few things in mind before opting for the same. [B-01] The interest rates on loan against property have been slashed recently. So, if you or someone you know is in need of a business loan or is in some financial need, opting for a loan against property might be the right thing to do. However, it is also vital that you do not get swayed by misinformation. We are here to bust some common myths about loan against property. Myth #1: Property, once pledged, cannot be used.Many people believe that if you have availed of a loan against property, you will lose your right to use it. This is nothing but a myth. If you have not defaulted on your payments, you are still the owner of the property, and thus, the property stays in your possession. Even if you pledge it, there are no constraints on the usage.However, as LAP is a secured loan, in case you default on the repayments, the lender would be able to auction the property. Myth #2: LAP can only be against residential property.Another misinformation about loan against property is that it can be against residential property only. You would be eligible for LAP, regardless if the property is residential, commercial or lease-rent discounting depending on the lender. Myth #3: One should always go for the loan with the lowest rates.This may seem tempting, but remember, this too is a myth! You need to check whether, along with a low rate, the institution is also charging higher penalties for pre-payments or any other hidden costs and fees etc. Unless you are cautious about these seemingly ‘small’ details, you may end up paying much more than what you were expecting.Reading the offer document in detail is very important. Make sure you understand all terms and conditions well enough so as to avoid any heartburn later. Myth #4: Pre-payment of LAP will be a costly affair.Well, this is not completely true. Pre-payment charges are levied generally in the initial few years. However, with time these charges may be reduced.It is also a fact that while pre-paying your loan against property, some lender companies charge you while some do not. Some banks/ financial institutions allow a pre-payment up to a certain percentage of the outstanding amount of loan, in one financial year. Myth #5: You can borrow the full value of your property.Sadly, this is also a myth. You will not be given a loan corresponding to the full value of your property. While some lenders offer a generous 70% of the property as a loan, there are some who offer only up to 50%.Apart from the company policies, these numbers also depend on the resale value of the property, it is, therefore, highly recommended that you first get a fair estimate about the value of the property that you are going to pledge. Myth #6: If your Credit Score is high, LAP is guaranteed.If you are someone who enjoys a good credit history and never miss your EMIs, then your LAP may be passed easily, however, it is not an eligibility criterion. Your CIBIL score will surely be taken into consideration when you apply for a loan against property, but remember that it is not the only deciding factor. [B-02] To Summarise: Loan against property is a great financial aid that you can avail in times of your business or personal requirements. Longer tenures and easy to pay EMIs are some key benefits of LAP. The rates offered are quite attractive. All in all, loan against property is a great option if you steer clear of the myths and understand the product better.
08-11-2023
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What Is Working Capital Loan?

Working Capital is an indicator of the financial condition of an organization or a company. Working capital indicates an organization’s liquidity levels, operational efficiency, and short-term financial health. Often referred to as Net Working Capital (NWC), it is the difference between the current assets (like cash, accounts receivable, unpaid bills, and inventories) and current liabilities (like accounts payable and debts) of a company. Company operations like inventory and debt management, revenue collection, and supplier payments give an idea of a company’s working capital. What is a Working Capital Loan? A Working Capital Loan is a loan to support day-to-day operations, ranging from paying employees’ wages to covering accounts payable. Business houses do not often have regular sales or revenue throughout the year, and thus, the need for capital to keep the operations going may arise. Banks and other Non-Banking Financial Institutions offer working capital loans to help offset your working expenses during such a low sales/revenue period. Companies with seasonal business cycles, cyclical sales, or reduced business activity periods require such a loan. These loans may be secured or unsecured, and you may or may not be required to pledge collateral to avail of the loan, depending on the loan amount and the financial condition of your business. Uses of Working Capital loan A Working Capital Loan is a type of business loan used to meet your short-term liabilities or financial obligations. It is not meant to fund your business expansion or asset purchase plans. The loan could be utilized for: Payment of monthly overhead costs (such as electricity, rent, salaries, and other day-to-day expenses) Purchase of raw materials Purchase of inventory Finance blocked payments from debtors Paying suppliers in advance Maintaining a healthy cash level Who Needs a Working Capital Loan? A Working Capital Loan is mainly applicable to small and medium enterprises (SMEs) and usually has a 6-48 month loan tenure. It is suitable for business houses that do not often have regular sales or revenue throughout the year. Thus, the need for capital to keep the operations going may arise. A working capital loan is an excellent choice for companies with cyclical sales or seasonal business cycles or even during periods of reduced business activity to sustain operations throughout the year. Who Can Apply for a Working Capital Loan? You are eligible to apply for a Working Capital Loan if you are: An entrepreneur, private or public company, partnership firm, sole proprietor, MSME, self-employed professional or non-professional. Above 21 years and below 65 years of age. Types of Working Capital Loan All banks/ lenders offer almost similar types of Working Capital Loans: Overdraft Facility or Cash Credit Term Loan Bank Guarantee Packing Credit Letter of Credit Accounts Receivable Loan Post Shipment Finance Features of a Working Capital Loan Loan Amount: It depends on the business requirements and experience and is customized to meet the business’s financial needs. Loan Tenure: Ranges from 6-48 months Interest Rate: Varies from lender to lender. Collateral: Working Capital Loans can be either secured or unsecured. Repayment: The repayment schedule is designed to match the business’s cash flow. Processing Fee: Banks charge a processing fee against the working loan sanctioned. Hassle-free loans: Easy-to-meet eligibility criteria and approved in 24 hours Flexible Withdrawals and Pre-payments: Flexibility in withdrawal of required working capital loan as and when needed. No prepayment charges are applicable either. [B-02] Key Takeaways A thorough understanding of Working Capital and its features can help you apply for a Working Capital Loan to meet your business needs. In short, working capital loans help businesses manage sales fluctuations, maintain a cash reserve, help take bulk orders, and equip to leverage trade opportunities.
08-11-2023
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Understanding Home Construction Loan

In contrast to buying an already constructed home, you may want to build a home according to your own needs. However, to construct a home, you would require enough capital to meet the financial requirements of the different aspects of building a home such as buying a plot, paying the labor, and others. A home construction loan help you get the money you need to build your home. In this article, you can understand the entire process of a home construction loan. [B-01] What is a Home Construction Loan? A home construction loan is simply a short-term home loan that can help you financially provide for the entire construction process of your home. Usually, home construction loans are offered for a lesser tenure compared to other loans. With this loan, you can cover the costs of the land, building material required, contractor labor, permits needed for home construction, and many more. More often, home construction loans include a particular contingency reserve that can be used to cover unexpected costs that may come up during the construction process. How Do Home Construction Loans Work? If you are planning to build a home, you may already have decided on a particular plot of land or a neighborhood to build your home. The bank or lending institution considers factors such as the neighborhood of the plot and others while sanctioning the loan. Let us have a look at the home construction loan process. Most construction loans cover the costs of buying a piece of land as well as constructing a home on that piece of land. Depending on your financial needs, it is best to check these terms with the lender before going ahead with the loan process. By covering both the costs of the land and construction, lenders tend to have more involvement in home construction loans compared to standard home loans. Once you’ve secured the loan, the lender will pay the builder in regular intervals depending on the phase of the construction. The lender first checks the progress of the construction and then releases funds accordingly. Before the construction is completed, you will only have to make interest payments. After completion of the house, you should start repaying the borrowed loan capital amount in EMIs. Types of Home Loans There are 5 main types of home loans. 1. Construction-Only Loan This loan only provides funds that are needed to complete the construction of the house. The borrower is responsible to repay the entire loan during maturity or get a mortgage to secure permanent financing. 2. Construction-To-Permanent Loan These loans allow you to borrow money to pay for the cost of constructing your home. The overall fees would be reduced as you have only one set of costs to pay. 3. Renovation Loan You can take out a renovation loan if you have been planning to upgrade your existing home rather than building a new one. 4. Owner-Builder Construction Loan These loans are either construction-only loans or construction-to-permanent loans wherein you also act in the capacity of a home builder. 5. End Loan Here are some tips for house construction that can come in handy. Select the builder carefully Investigate the area in which you want to build your home Hire a lawyer Don’t overbuild Don’t select a builder based just on their bid Decide the neighborhood carefully Note down your requirements before approaching the builder [B-02] In a Nutshell A home construction loan can help you build the home of your dreams. You can pick any type of home construction loan depending on your needs. If you are looking to avail of home construction, Piramal Finance can help you with one while offering benefits such as quick loan sanctions.
08-11-2023
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Home Loan

Tips And Advice For Loan Against Property

Whether you are a salaried employee or a businessman, the first thought that comes to mind when you are facing a cash crunch is to apply for a loan with a financial institution. There could be various reasons where you would require funds to meet exigencies such as a child’s higher education, a medical emergency in the family, cash flow concerns in the business, or when you plan to expand your business. A loan against property or LAP can be a good option that can aid in meeting your fund’s requirements. Being a secured loan the interest rates offered by lenders are lesser as compared to other loans. [B-01] What is a Loan Against Property? A loan against property is a secured loan where you pledge your commercial or residential property as collateral to the lender in exchange for a loan. It can help a borrower take care of their cash flow needs by mortgaging their property and the higher the value of the property, the higher the loan amount. As long as you can establish the ownership of the property in your name, you are good to go. In case of disputed property offered as collateral or if the documents establishing property ownership are not clear, the chances of loan application being rejected is much higher. Loan Against Property Benefits A loan against property is a preferred option while looking for a loan to deal with a cash crunch you are facing as an individual or to address the cash flow issues of a business.Some of the key benefits of a loan against property are listed below Longer repayment tenure – A loan against property is a secured mode of finance that comes with lower interest rates offered by financial institutions as compared to a personal loan. The interest rates could be different for residential and commercial properties. Easy availability – A loan against property is fairly easy to avail of, because the lender has a guarantee for the money they are lending. A hassle-free loan approval process and quick sanctions make it a favoured option for the borrower. Lower EMIs – A longer repayment tenure means EMIs are spread out for a long period hence the monthly installment amount is nominal. This helps in keeping the EMI repayment easier without affecting your monthly household budget. Ownership of the property – A borrower maintains ownership of the property even when using the funds sanctioned through the loan against the property. It allows borrowers to unlock the value of a piece of land he/she owns while still using the property during the loan tenure. Tips for Loan Against Property A loan against property can be used for multiple purposes ranging from taking care of medical exigencies to going on a long vacation. Listed below are some important tips to be kept in mind before applying for a loan against a property. Evaluate repayment capability – The monthly income of a borrower is one of the major parameters considered while evaluating their repayment capability. Ideally, the EMI amount should not exceed 50% of the monthly income to ensure easy repayment. Assess your eligibility – Eligibility criteria for a loan against property can be different for different banks and financial institutions. One of the key pieces of advice to ensure loan approval is to assess your eligibility based on the criteria set by different lenders. Maintain a good credit score – A good credit score improves your chances of loan approval and can help in getting lower interest rates when applying for a loan against property. It is prudent to check your CIBIL score before applying for the loan. A good credit score instills confidence in the lender and proves your creditworthiness to the lender. Ensure proper documentation – One of the important factors to ensure the loan is approved by the lender is to provide proper documentation. Documents are required to establish the borrower’s ownership of the property against which the loan is being sanctioned. Once received, the lender verifies the property documents to ascertain the market value of the property. [B-02] Bottom Line In a nutshell, a loan against property is a viable option to consider when looking for avenues to finance your personal and business-related fund requirements. Multiple benefits such as higher loan amount, longer repayment tenure, and lower loan against property interest rates make it a preferred alternative to a personal loan. However, while applying for the loan be mindful of the fact that defaulting in repayment can affect your credit score and can lead to legal hassles.
08-11-2023
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