Most people are sceptical about mortgage loans as it involves a huge amount of risk and confusion. But the loan against property is secure mortgage loans which are available to both salaried and self-employed persons. As you might have guessed through the name, it is a kind mortgage loan that involves your property or house as a guarantee against the loan. The Loan amount you can get depends on the value of your property. Normally most of the banks offer loans which are equal to 50-60% of the total market value of the property.Thereby, if used properly , there are various advantages which we can make from mortgage loan or lap.
There are various purposes for which you use these type of loans, that includes –
- When you require extra monetary support for the educational purposes of your children.
- During sudden need of funds because of some medical emergencies.
- For managing the shortage of funds in the crucial event of your life like a marriage ceremony.
- Through these types of loans, you can also fulfil your life long dream of vacation.
- With this kind of funding, you can easily make all the much-needed changes in your business.
Benefits You Can Derive From Loan Against Property
Lesser Interest Rates
As the loan involves your property as a guarantee, so commonly it requires you to pay low-interest rates in comparison to personal loans. The interest rate of LAP can vary from 12%to 15% depending on the banks. While if you take a personal loan, it can involve interest rates as high as 15%to 25%.
No Extra Charges On Prepayment Of Loan
In case of other types of loans like personal loans, can charge you an extra fee for prepayment of loan instalment. But if you are making payments beforehand in case of LAP, the lenders normally don’t charge any extra fees.
It is Hassle-free To Get These Loans
As these loans are secured and involve your property as a guarantee against the loan, the banks are more willing to provide LAP to their customers. So it is not too complicated to get a mortgage loan, especially if it is LAP.
Long Repayment Period
The repayment period of these loans is generally as long as 15 year. In comparison, the maximum repayment tenure in case of any personal loan could be low compared to a mortgage loan like LAP.
Smaller EMIs Are Available
The amounts of the EMIs are inversely related to the repayment period of the loan. Generally, if you opt for a longer repayment tenure, then the EMIs are smaller. If you want to get rid of LAP as soon as possible, then shorter tenure with higher EMIs is more suitable.
What Are Tax Benefits You Can Get From LAP?
When you are calculating your annual avenue and tax, then remember that having a mortgage loan like LAP makes you eligible for exemption on tax. If you are unsure about your eligibility, look for tax advisory services companies to guide you. The exemption can be claimed on interest payments on LAP either under section 37(1) in case of business purposes or under section 24 (b) for capitalizing other property.
Tax Reduction Under Section 37(1)
The deduction under these sections is available only if you have taken the loan for business purposes. In such cases, the monthly interest that you play along with other extra charges like processing fee, documentation charge, etc. could be deducted as business expenditure according to Section 37 (1) of Income Tax Act.
Tax Reduction Under Section 24(b)
The persons who get monthly salaries are only eligible for tax deduction under these sections, only if the loan taken is used for capitalizing any other property. In such situations, the individual can claim deduction on interest under section 24(b) after using the loan ended.
No Reduction On Tax Available On LAP For Personal Use
If you are using the loan amount for personal reasons like funding your children’s education, managing extra expenses of marriage, emergency medical bills, etc., there is no Reduction on tax available.
No Tax Exemption Available Under Section 80
The repayment of the home loan’s principal amount is approved under these sections, but no tax exemption is applicable in those situations. These sections allow deduction under various clauses in case mortgage loans like loan against property are not applicable even if the loan amount is used for purchasing other property or house.
Life is an unpredictable journey and problems can arise even if you are fully prepared to dodge them. In emergencies or financial crises, when you need huge sums of money instantly, the LAP is the best option available in the market. It helps you manage any financial emergencies and provides various benefits that help create a more stable financial situation for the future.