Avoid over-leveraging with loan against property: All you need to know

  • Loans against property (LAP) are popular among businessmen who prefer them over personal loans to meet their working capital needs as the interest rates are lower 

     
  • But if the business falters, or the borrower is unable to rent out the property and earn rental income from it, he could face problems in repaying the loan

     
  • In case of a default, the lender could repossess the property. Therein lies the main risk of LAP

     
  • Only take this loan for productive purposes   

     
  • Have backups in place - assets like gold, ancestral property, shares, etc - that can be sold in case you run into cash flow problems 

     
  • In case of default, speak to your lender and explore the option of restructuring, that is, lowering EMI and extending  tenure 


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