A Loan Against Property (LAP) is a popular financing option that allows property owners to raise funds by mortgaging their residential or commercial property. In India, LAP is widely used for business expansion, education, medical expenses, debt consolidation, or any other personal or professional need.
In this article, we explain what a loan against property is, how it works, eligibility, benefits, interest rates, and important factors to consider before applying.
What Is a Loan Against Property?
A Loan Against Property is a secured loan where you pledge your owned property as collateral to a bank or financial institution. Since the loan is secured, lenders offer lower interest rates compared to personal loans and longer repayment tenures.
You continue to own and use the property while repaying the loan.
How Does Loan Against Property Work?
When you apply for a LAP, the lender evaluates:
Market value of the property
Applicant’s income and repayment capacity
Property location and legal status
Typically, lenders offer 50% to 70% of the property’s market value as a loan.
Types of Properties Accepted for LAP
Banks and NBFCs generally accept the following properties:
Residential houses or flats
Commercial buildings or shops
Self-occupied or rented properties
Agricultural land is usually not accepted for LAP.
Eligibility Criteria for Loan Against Property
Eligibility may vary by lender, but common requirements include:
Applicant must be an Indian resident
Age usually between 21 and 65 years
Stable income source (salaried or self-employed)
Clear property title and ownership documents
Both individuals and businesses can apply for a LAP.
Loan Against Property Interest Rates in India
Interest rates for LAP are generally lower than personal loans and range between 8% to 13% per annum, depending on:
Applicant’s credit score
Income stability
Property type and location
Loan amount and tenure
Since rates are competitive, LAP is a cost-effective borrowing option.
Loan Tenure and Repayment
Loan Against Property offers long repayment tenures, usually up to 15–20 years. A longer tenure results in lower EMIs, making repayment easier and more manageable.
Borrowers can also opt for part-prepayment or foreclosure, subject to lender terms.
Benefits of Loan Against Property
Lower Interest Rates
Being a secured loan, LAP has lower interest rates.
High Loan Amount
You can borrow a substantial amount based on property value.
Flexible End-Use
Funds can be used for business, education, or personal needs.
Longer Tenure
Long repayment period reduces EMI burden.
Tax Benefits
Interest paid may be eligible for tax deduction if the loan is used for business purposes.
Documents Required for Loan Against Property
Common documents include:
Identity and address proof
Income proof (salary slips, ITRs)
Bank statements
Property documents
Passport-size photographs
Proper documentation ensures faster loan approval.
Loan Against Property vs Personal Loan
Feature Loan Against Property Personal Loan
Interest Rate Lower Higher
Loan Amount High Limited
Tenure Long Short
Collateral Required Not required
For large financial needs, LAP is usually the better choice.
Risks and Things to Consider
Before opting for a loan against property, keep these points in mind:
Default may lead to property seizure
Processing time is longer than personal loans
Property valuation affects loan amount
Ensure EMI fits your monthly budget
Careful financial planning is essential.
Final Thoughts
A Loan Against Property is a powerful financial tool that helps you unlock the value of your property without selling it. With lower interest rates, higher loan amounts, and flexible usage, LAP is ideal for meeting major financial requirements.
However, since your property is at stake, it is important to borrow responsibly, compare lenders, and ensure timely repayments.