Advantages to the Borrower-Consumer
-Financial institutions generally encourage this type of loan as they earn more loan interest here than in other loan products. These loans are the safest bet for them as they are backed by securities and the amount of loan is always less than the value of the property. In case of a default, the property can always be seized and sold to recover the money. (The average LAP ticket size is higher than a home loan; its tenure is also shorter than the home loan, with the for home loans. Typically, the interest rate for LAP is loan rate.) -From the consumer’s point of view, such loans are processed faster than other traditional loan products.
-Title deeds are better kept with financial institution than at home, as they provide document security. Keeping them at home is risky due to burglary, fire, etc.
-Businessmen/traders sometimes face liquidity crunch in the money market. For them, loan against property comes cheaper than market borrowings (at minimum three per cent per month).
-The overdraft (OD) facility is a boon to the business class, as it complements their income/ and again subject to the overall OD limits fixed. On top of that, interest is charged only on the amount utilised.