Loan Against Property

Loans Against Property (LAP) / Home Equity(HE):

• Loan against Property (LAP ) is a very unique product which couples the feature of a personal loan and a secured loan . This loan product helps in unlocking the value of the most precious asset," Property". The end use of the loan is not monitored when compared to any other secured loan which generally comes with a specific purpose. In that sense , LAP is an any purpose loan , but at the same time secured by collateral of the property. This loan product is a very powerful one and is the best tool for those looking at debt consolidation. There are several businesses which has obtained high cost funds like unsecured business loans and leveraged themselves to a greater extend, thereby putting pressure on higher interest cost and lower profit margins. LAP perfectly fits for such businesses to reduce their borrowing cost and consolidate debt at a lower cost. The other advantage is the tenor for LAP loan is generally in the range of 7 to 15 years, thereby giving the borrower to plan business expansion among other things. Moreover with the appreciation of property, future requirements also can be taken care of. This allows the best use of the property that is owned and at the same time will enable the raising of funds required for various purposes. Also, a loan against property comes with a low interest rate compared to that of a personal loan or home loan.

Cash Credit:

• Cash credit is a facility which operates in a manner different than that of various other loans. Cash Credit comes with a limit and it helps in the smooth conduct of business. It also helps in reducing the asset liability mismatch. Cash credit limit is sanctioned for a specific period of time, usually a year. The entity to which the limit has been sanctioned can use the cash credit at any point during the time period and the specified rate of interest will be charged on the amount that is taken or used. It can be operated like any other account. It means withdrawing money when there is a need and then depositing back the payments received from the parties.

Overdraft:

• Many a time it is not possible to raise loans during an emergency for funds in the business. Under such circumstances the investments in the form of Fixed Deposits, Govt of India Bonds, Debt funds can help in raising funds without much difficulty. Here, an investor can earn returns on his/her investment just like a normal investment and at the same time use this investment as a means to raise funds that can be used for the business.

Term Loans

Term loans are one of the traditional and most common routes used by entities to raise funds. These funds are then used for the business in various ways. One big area of lending in case of term loans is the loans given to small-scale enterprises and businesses that are typically run by individuals or even firms and companies. Term loans form a significant part of the lending process of an entity and this is the reason why it requires attention.
There are various purposes for which a bank will provide a term loan. There is a list of reasons why this is done and the borrower has to ensure that the reason that they seek a loan for is one of it. Some of the common reasons listed by the banks include:

• To set up plant & machinery.
• To reduce high cost of borrowings.
• To build assets for a business.
• To strengthen the asset base.
• A borrower has to provide the necessary details and documents in support of the claim and then he/she will become eligible for the term loan.