Different loan options like education loan, personal loan, loan against property, etc. are available in the market for financing your child’s education. The most feasible option is a
What is a Loan Against Property (LAP)?
As the name suggests, Loan Against Property (LAP) is a loan given against the mortgage of property. This loan is given as a fixed percentage of the value of your property.
Advantages of Loan Against Property (LAP)
There are several advantages that make a loan against property a popular and preferred choice. The main advantages of LAP are as follows:
- Easy Processing: Easy documentation and speedy approvals lead to easy processing of this loan. The total processing time of loan against property is much less than other loan options for financing education.
- Collateral Security: If you apply for a loan against property, you do not need any other collateral security. While if you apply for an education loan, you always need to provide a collateral security to the money lender.
- Higher Loan Amount: Loan against property is a secured loan and hence you have access to a higher loan amount in this loan option. You can avail a loan amount of up to 70 % of the value of your property.
- Overdraft Facility: Overdraft facility is available in this loan option where you can borrow a large amount despite having insufficient balance in your account. Your overdraft limit is determined by the value of your property and your credit history.
- Lower Interest Rates: Since it is an asset-backed loan and a secured option, the interest rate is lower as compared to other loan options.
- Financial Planning: Since the loan amount gets transferred to your bank account, you can plan your finances in a better way.
- Longer Loan Tenor: The loan tenor is generally longer as compared to other loans. Longer loan tenor means lower EMIs which is again beneficial for you as a borrower. Loan against property generally has a tenor of 5 to 15 years. The maximum loan tenor is 20 years.
- Payment Options: Part payment, prepayment, and foreclosure options are also given by money lenders in this loan option. This means that you can reduce the interest burden and the tenure of the loan by paying a small additional cost.
- Top up loan: Loan against property comes with a top-up facility. If the value of your property rises during the tenor of the loan, you have the option of availing a top up on the existing loan.
A loan against property is one of the best ways to raise money for your child’s education especially if you are looking for a large size loan.
The only risk factor associated with this loan is that the money lender has the right to sell your property and realize the loan amount if you are unable to pay off the loan on time. So you should always assess your repaying capabilities before opting for a loan against property.