Loan Against Property Overdraft Facility — Everything You Must Know

Although purchasing a home is a significant financial obligation, taking a loan against property is useful if you are considering applying for another loan to meet your short-term needs. It's hard already to be a home loan borrower due to the enormous financial burden, but when you face an emergency, circumstances get even worse for you. In these conditions, there are limited opportunities for you to consider given the fact that your credit score is a significant determinator as well. However, with the rise of flexible financing options provided by the modern financial institutions, the benefits to the borrowers are plenty, and you can leverage your existing financial partner for your advantage. In critical situations that demand quick finances, LAP-OD will prove useful.

How does LAP-OD function? 

Loan Against Property- Overdraft (LAP-OD) is a facility offered by banks to raise funds against an asset for the short term. In other words, LAP-OD is a short-term credit granted against a property to the borrowers. As collateral, you can provide either your residential property or commercial property. The lending institution will get an impaneled valuator to do the technical and legal valuation of this defense. After that, the lender finances any portion of this property's market value.

Eligibility for a Loan: 
In addition to a property's market value, the credit history, repayment potential, business and income stability, experience, age requirements, number of assets, and liabilities, and all of those considerations are weighed while deciding on the amount of the LAP-OD loan.

Loan Against Property Interest Rates: 
The loan against property interest rate ranges between 12 percent and 14.50 percent.

LAP-OD is usually provided over a maximum 24-month duration. The cap may be renewed at various intervals, at the lender's discretion.

Co-applicants and target borrowers: 
Self-employed and salaried professionals. At least one co-applicant is mandatory when a LAP-OD loan is made available. All mortgage property owners should be required to join the LAP-OD loan application.

FOIR (fixed obligation to income ratio) and LTV (ratio of loan to value): 
The maximum amount of FOIR and LTV that most lenders provide for LAP-OD is 70 percent.

Improved LAP-OD limits sanctioned: 
Any increase will be discretionary to the bank. The borrower's financials must justify the OD limit enhancement demand and must comply with the bank's LAP-OD standards.

Credit summary: 
Many lenders find it imperative that the borrowers channel their business profits through the account LAP-OD.

Guide for Borrowers with LAP-OD 

Note that the money raised using the LAP-OD facility has often been put in the share market, which, according to financial norms, is a strict no-no. Stocks form a highly volatile class of assets. If you lose the LAP-OD money, you're going to be in considerable trouble because you're going to pay higher interest rates on the penalized limit and stay out of the contingency fund where you first took the LAP-OD loan. Hence, such a facility should be used only for emergency purposes and when you have a clear repayment strategy.

Loan Against Property Overdraft Facility — Everything You Must Know Loan Against Property Overdraft Facility — Everything You Must Know Reviewed by Newzpot on 19:45:00 Rating: 5
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