Saving is an extremely important aspect of the financial planning of every individual. However, there may be times when you pass through a rough patch and require a bit of financial aid to tide over troubled times. In case you are looking to borrow for the long term, you can resort to obtaining a loan against property by mortgaging your house or land. The key reason why taking a loan against your property is a good idea is that the Mortgage Loan interest rates are lower compared to a personal loan, which features interest rates that can be as high as 20%. Taking a loan against property should not be an option only during times of distress but for fulfilling other goals as well. Let’s take a look at a few unexpected uses of loan against property:
1. Paying off your credit-card debt
Falling into a vicious cycle of a credit card debt is one of the worst situations that you can come. If your credit card bills have spiraled out of control, it is better that you take a loan against your property to pay off your credit card debts. The interest rates on credit cards are sky high and you will fall into the vicious cycle of debt repayment on your credit card if you do not pay it all at once to end it. It is wiser that you repay the loan on your property at cheaper instalments than to pay for the exorbitant interest rates that credit cards charge, which range from 24%-46% annually.
2. Pursuing higher education abroad
Quality education isn’t cheap and in case of high education loan amounts, bank accepted collateral such as property is mandatory.Many people also choose to send their children abroad for further studies by taking a loan against property because at times getting a education loan comes with multiple hassles. Whether it is for yourself or your children, you can resort to a loan against property to meet the educational needs of your children.
3. Expanding/Establishing your new business
When you have a business which you want to restructure and grow, you will require substantial amount of capital to do so. You can resort to mortgaging your property to meet the essential costs for bringing about these structural changes, meeting operating expenses and hiring resources among other necessary costs. The good thing is, you have a time frame of up to 15 years for the repayment of the loan and the interest rates are quite low since a loan against property is a secured loan.
With the rising fad of boutiques and fancy restaurants, it is not a bad investment idea to take a loan against your property to meet your entrepreneurial goals. If you have a business idea in mind, you can go ahead and finance your business by taking a loan against property. However, an element of risk remains in case you are unable to repay the loan taken. Hence you must have a proper business plan in place and improve your chances of running the business successfully before taking a loan against property.
4. Taking off for your dream vacation
Have you been planning a dream vacation to an exotic location since forever but never managed to take one due to financial constraints? If you think you truly deserve a break then you can take a loan against your property to take a much deserved break. It is not such a big deal, as long as you know you can repay the loan within the stipulated time. As the interest is cheaper, your Equated Monthly Installments (EMI) will also be lower, which makes it a better option than to opt for a personal loan to take a vacation.
In conclusion it must be pointed out that loan against property has emerged as a top choice among borrowers seeking a long term borrowing option for a variety of personal and family expenses. One of the primary reasons for this is that the use of money borrowed through LAP has minimal restrictions similar to a personal loan, which is another point in favour of this mortgage loan. But what really sets loan against property apart from other loan options in the market is the incredibly low interest rate as compared to other options such as personal loans.