LAP commonly known as property loan is a loan provided by the bank/financial institution against the mortgage of your property (residential or commercial) provided the same has not been put up as security for any other purpose. LAP differs from a mortgage/home loan which is a taken to buy a property. LAP is a loan taken by putting up the existing property as a security against the loan.

When you find yourself in a spot of bother as far as finances are concerned, due to medical emergencies or losses in business or requirements to fund your child’s education or any other need, let not liquidation/sale of assets be your only option to solve the current cash flow problems. Financial markets now provide several loan products that will help you to keep intact your assets but at the same time provide you with the finances you need to tide over the situation. Some of the products available include personal loans and Loan against property (LAP)

Personal loans:

These are loans given to individuals without any security, collateral or guarantor on the same. Hence they are unsecured loans. The quantum of loan to be given will be based on the credit rating and the monthly income of the individual. The processing of this loan is very quick because of minimal paper work. The rate of interest on this type of loan is very high and is second only to the interest rates charged by credit card companies.

When is a personal best taken?

If there is an urgent need for cash, personal loans may be an option because of the quick processing.
Paying off your credit card dues because the interest charged on credit cards is very high. Therefore taking a personal loan may reduce the amount of interest that you will pay. Personal loans are very expensive and should be resorted to only if you have no other choice and you are in need of short-term cash.

Loan against property (LAP)  :

LAP commonly known as property loan is a loan provided by the bank/financial institution against the mortgage of your property (residential or commercial) provided the same has not been put up as security for any other purpose. LAP differs from a mortgage/home loan which is a taken to buy a property. LAP is a loan taken by putting up the existing property as a security against the loan. The maximum loan amount would be anywhere in the range of 40% and 60% depending on the market conditions and other factors. The borrower can either opt for an overdraft option where he is required to pay interest only on the amount withdrawn or a lump sum loan amount. The disadvantage of an overdraft facility is that the interest rate charged may be higher, in some cases up to 0.5% and also annual processing fees will be charged. Besides, if you want the overdraft facility, you have to take the loan only from the bank as other financial institutions do not offer saving/current account. In case of a lump sum loan, processing fees are charged only once when the loan is taken and also the individual can approach either a bank or financial institution for the loan.

When is an LAP best taken?

• Long tenure loans: For individuals requiring funding for a long periods of time, LAP can come very handy because the tenure of these loans can be a maximum period of 15 years
• Large Loan amount: Individuals requiring substantial funds also should consider this loan option as a large loan is possible. Of course it depends on the property value. There is no restriction as in case of personal loans where the maximum loan permissible is Rs. 10 lakhs.
• Lower rate of interest: On account of the security provided in terms of the house, the rate of interest charged by banks tends to be much lower than personal loans