Loan Against Property
Loan against property is the perfect way to unlock the hidden value of your property. LAP is designed to meet the financial needs of someone who already owns a house or multiple properties so as to get the best out of their assets. A loan against property can be taken as a business loan to grow your business, or to fund your children’s education, or meet wedding expenses or any other personal expenses. It is loan granted against the mortgage of property. The loan amount ranges from 50% to 75% of the valuation amount. Banks provide LAP for both Salaried as well as Self-Employed individuals. The rates and loan amounts differ based on your property and your annual income. Loan against property is a secured loan as the borrower guarantees that default, if any, can be compensated by his property. LAP is a better option compared to personal loan as the rate of interest is lesser in case of LAP (being a secured loan).The loan tenure can be up to 15 years and the interest ranges between 9.50% to 15%. Loan against property can be taken for various reasons:
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For business requirements i.e. for purchase of stock, machinery, expansion of business etc. or we can say to meet working capital requirements of business
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Closure of existing high-cost existing loans
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Purchase of commercial premise (office / shop) or land and / or industrial premise (office / shop) or land
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For Personal use might be for wedding of children, for their higher education etc.
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In debt consolidation
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Any other personal, professional needs
LAP can be classified as:
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Loan against residential property – this loan can be taken against your residential property that is self occupied, rented or vacant
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Loan against commercial property – this loan can be taken against commercial property that is self occupied, rented or vacant
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Loan against industrial property – this loan can be taken against industrial property that is self occupied, rented or vacant
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Loan against open land – this loan can be taken against open land which can be residential or commercial
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Balance transfer – this loan can be availed to reduce the ROI of current running loan by transferring it from the present financial institution
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Balance transfer and top up – this loan can be availed to reduce the ROI of current Documents required for applying for LAP are similar to that of Home Loan as mentioned in Home Loan Section.
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Running loan by transferring it from the present financial institution and also giving further enhancement on the takeover loan
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Top up – One can get an enhanced or additional amount from the existing financial institution on the running LAP
Criteria for eligibility of LAP are:
Criteria for eligible for LAP are similar to that of Home Loan as mentioned in Home Loan Section.
LAP/ Mortgage Loan Application Fees and Charges:
Mortgage Loan Lenders levy some fees and charges at the time of loan sanctioning which includes Processing Fees. Prepayment/ Foreclosure Charges: Prepayment fee comes in to play when one wants to prepay the loan before the end of the tenure. Different banks have different charges so one should take the time out to know them.
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Unsecured Loan
Unsecured loans are types of loans that don't require collateral. Instead, approval is based on creditworthiness. Common examples include Business Loan,personal loans, credit cards, and student loans. These loans typically have higher interest rates due to the lack of collateral. The approval process involves a credit check, income verification, and consideration of debt-to-income ratio. While unsecured loans offer flexibility and quick approval, borrowers need good credit to qualify for favorable terms.
Limit : Upto 2.5 Crore.
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Secured Loan
A secured loan is a type of loan that is backed by collateral, which is an asset that the borrower pledges to the lender as security for the loan. If the borrower fails to repay the loan according to the agreed-upon terms, the lender has the right to seize the collateral to recover losses. Here are the key details about secured loans:
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Lower Interest Rates: Secured loans often come with lower interest rates compared to unsecured loans because the lender has a form of security.
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Longer Repayment Terms: Secured loans may have longer repayment periods, especially for mortgages.
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Asset Valuation: The value of the collateral determines the loan amount a borrower can access.
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Lease Rental Discounting
LRD as the name reveals is one of the loans offered by banks under which an applicant avails loan against his/her leased or rental property. Under this loan borrower pledges the future receivables under specified escrow arrangement where the rent is directly deposited with the lender and not with the borrower. LRD is typically offered against commercial or industrial properties. Under the scheme lenders usually prefer the rental receivables from renowned corporate where the lease agreement is executed for a definite tenure. Lenders also ensure that the future rental earnings from the property are secured before offering LRD. To avail this loan the property should be occupied by the Lessee as in Loan against Property.
The borrower is sanctioned the loan based upon the rent to be collected over the period of lease. This product is tailored for people having significant rental income. The tenure of such loans is much shorter than other property based loans and usually linked to the amount of time remaining for the lease on property to expire. Most institutions provide Loans upto 90% of the value of remaining lease, provided the borrower can convince the lender and exhibit the ability to pay the installment for such a loan. LRD enables you to encash your current rental cash flows and Funds can be used for expansion of business, consolidation of obligations and / or business capital requirements.
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MSME FINANCE
Working Capital Loans/ MSME Finance :
The Micro, Small & Medium Enterprises [MSME] sector has been recognized as the engine of growth.The development of SME has been assigned an important role in national plans. Commercial Banks are advised from time to time by GOI and RBI to finance liberally to MSMEs. Lending to Micro & Small Enterprises qualifies for PSA.
A working capital loan is a loan that has the purpose of financing the everyday operations of a firm. Working capital loans are used to cover accounts payable, wages etc. Companies that have high seasonality or cyclical sales cycles usually rely on working capital loans to help with periods of reduced business activity. Working capital is the cash available to finance a company's short-term operational needs. However, sometimes a company does not have the adequate cash on hand or asset liquidity to cover daily operational expenses. Therefore, working capital loans are simple corporate debt borrowings that are used by a company to finance its daily operations. The immediate benefit of a working capital loan is that it's quick and lets business owners efficiently cover any gaps in working capital expenditures. Some working capital loans are unsecured. If this is the case, it means that a company is not required to put down any collateral to secure the loan. However, only companies or business owners with a high credit rating are eligible for an unsecured loan. Businesses with little to no credit have to securitize the loan. This type of finance / loan is suitable for meeting the needs of small to medium sized enterprises (SME) that can include Small Scale Industries, Traders, Builders, Societies, Trusts, Educational Institutions, Hospitals and Hotels etc. This funding represents a major function of the general business finance market in which capital for different types of firms are supplied, acquired and priced.
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