InvestorQ : What are the different types of loans against property (LAP)?
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What are the different types of loans against property (LAP)?

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Nitin Shah answered.
3 years ago
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A Loan Against Property (LAP) is a loan given by a lender against any property. The loan can be taken against fully constructed, residential, and commercial properties for varied purposes such as business needs, marriage, medical expenses or any other personal needs.

The different types of LAP are:

1. Business expansion loans – Businesses require money from time to time for their various requirements such as for acquiring new machinery, purchasing plants, meeting working capital requirements, and investing in new technology or business. Lenders require collateral in the form of property, residential, commercial, or industrial.

Based on the nature of the property available as collateral, lenders calculate the business’s loan eligibility. For commercial properties, the loan-to-value (LTV) is 55- 65%. In the case of industrial properties, the LTV reduces to 40-55%, whereas the LTV in case of residential property is in 65-70% range.

2. Working capital overdraft facility – Lenders sanction overdraft facilities to businesses against property for meeting the business’s day-to-day working capital requirements.

3. Personal expenses - Individuals can also avail Loan Against Property (LAP) for personal expenses such as medical expenses, educational expenses, marriages, travel, as well as for purchasing consumer durables.

4. Home renovation - People usually don’t avail this loan for renovating homes as there are separate schemes available at relatively lower rates of interest. However, there can be circumstances when the borrower might have to apply for a loan against property (LAP) for home renovation.

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