A Loan Against Commercial Property (LACP) is a type of loan offered by banks and financial institutions where the borrower can pledge their commercial property as collateral to avail of a loan. The loan amount offered is a percentage of the value of the property pledged, and it can be used for various purposes such as business expansion, working capital, purchase of equipment, etc.
Commercial properties eligible for LACP include office spaces, retail shops, warehouses, factories, and other commercial buildings. The loan tenure usually ranges from a few months to several years, and the interest rates are generally lower than unsecured loans due to the collateral provided.
The borrower needs to provide the necessary documents related to the property ownership and financial status, and the lender evaluates the loan application based on various factors such as the market value of the property, the borrower’s creditworthiness, and the purpose of the loan. Once the loan is approved, the lender takes possession of the property documents as collateral and disburses the loan amount to the borrower. The borrower needs to repay the loan amount along with the interest within the specified loan tenure. If the borrower defaults on the loan repayment, the lender can seize and sell the pledged property to recover the outstanding loan amount.
People often find themselves stuck in an emergency situation where they do not understand how to obtain funds. During such demanding times, one can apply for a loan against property and get the required money to fund their expenses. This secured credit instrument allows borrowers to get a sizable loan amount by keeping their immovable assets as collateral. Further, entrepreneurs can even opt for a loan against commercial property and get the funds they require without any hassle.
How to apply for a loan against commercial property?
Willing applicants can follow these simple steps in order to make a loan against property application:
Step 1: Visit the official website of your preferred financial institution and locate the loan against property in the products tab.
Step 2: Following this, click on ‘Apply’ to open the online application form.
Step 3: Fill up the application form with all the details as asked by your lender.
Step 4: Upon successful submission of the application form, a representative of the lending institution will get in touch with you for the documentation stage and guide you through the next steps.
Eligibility criteria of loan against commercial property
Both self-employed and salaried candidates can choose to use this credit facility, but there are requirements they must follow. Which are:
- Age requirements: To be eligible for this loan, applicants must be between the ages of 25 and 70.
- Nationality: Must be Indian residents to avail a loan secured by real estate.
- Income: You must have a stable income source to apply for a loan against property.
In addition to fulfilling these requirements for loan against property, applicants must additionally provide supporting documentation. Property-related papers must also be submitted with these other papers. A candidate who meets all the eligibility parameters and submits the necessary documents on time enjoys the most lucrative offers.
What are the benefits of opting for a loan against commercial property?
Due to its secured nature, this credit instrument gives customers access to sizable funds at reasonable loan against property interest rate. However, those applying for financing must mortgage the business property. The worth of the property in the current market will also have an impact on how much they can buy.
Here are some of the other beneficial aspects of a LAP:
- Foreclosure facility
Candidates can pay back the total amount they have borrowed before the tenor expires. One might reduce their interest costs by repaying a loan earlier. Also, this lessens their financial load and makes it easier for them to take care of their other financial obligations.
However, it is important to consider the fact that some lenders might charge a foreclosure fee. Hence, one should always discuss these terms before applying for a loan against property.
- Balance transfer facility
With the use of this credit facility, consumers can refinance their loans from one lender to a different one at a cheaper interest rate. Often, this is done to lighten the EMI burden. Users can also utilise the top-up loan facility to get more money to satisfy other financial obligations.
- Long repayment tenor
As the loan amount is secured by an asset, lending institutions usually offer a long repayment tenor. Further, one can use the loan against property EMI calculator to choose their desired repayment as per their financial standing.
The corresponding monthly instalment amount decreases by selecting a longer tenor. Yet, it might also raise the total cost of interest. Hence, one should make an informed decision by considering all the aspects.
Further, there are several leading financial institutions in our country that provide pre-approved offers along with secured credit instruments. These offers are specially designed to fasten the loan approval stage and help applicants get the required funds within a minimum turnaround time. Eligible candidates can check these offers by providing their names and contact details on the lender’s website.
A loan against commercial property comes with a variety of benefits, but borrowers should be aware of a few things. Hence, before applying for credit, make sure to check some of the essential factors, such as LTV ratio, additional fees, etc., to enjoy a seamless borrowing experience.
