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

While interest rates are more attractive than in a personal loan, don't overlook the risk of losing your property if you default on your EMIs

• 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