Everything You Need to Know About Loan Against Property
A Loan Against Property (LAP) is a secured loan where you pledge your residential or commercial property as collateral to borrow funds. It allows you to unlock the value of your property without selling it, providing larger loan amounts and longer repayment tenures compared to unsecured loans like personal loans.
What is a Loan Against Property?
LAP is a financing option that lends you money based on a percentage of your property's market value. Since it is secured by property, LAP generally offers lower interest rates than unsecured loans. This loan suits those needing substantial funds for business expansion, debt consolidation, medical expenses, education, or home renovation.
Key Features of Loan Against Property
Loan Amount: Typically up to 40-70% of the property's market value, depending on the lender's policy.
Interest Rate: In 2025, interest rates mostly range between 9% to 13% per annum, variable by lender, credit score, and property type. Some banks offer rates starting as low as 8.99%.
Tenure: Extended repayment period of up to 15-20 years, reducing EMI burden.
Secured Loan: Property acts as collateral; failure to repay may lead to property auction.
Flexible Use of Funds: No restrictions on how you use the loan amount.
Tax Benefits: No direct tax benefits unlike home loans, but interest paid on LAP may be eligible under certain conditions (consult tax advisor).
Eligibility Criteria
Ownership of a clear title property: Residential, commercial, or industrial property.
Stable income: Salaried or self-employed with minimum income thresholds set by lenders.
Good credit score: Usually a CIBIL score above 700 improves approval chances and better rates.
Property valuation & documentation: Property must pass lender’s valuation and legal scrutiny.
How to Apply for Loan Against Property
Check eligibility and loan amount: Assess your property worth and determine the loan you can get.
Compare lenders: Interest rates, processing fees, prepayment charges, tenure options, and customer service.
Documentation: Identity proof, income proof (salary slips, ITR), property ownership documents, and valuations.
Loan application: Submit forms online/offline with documents.
Property verification and processing: Bank evaluates property and creditworthiness.
Loan sanction and disbursal: Funds released after approval, either as lump sum or overdraft facility.
Pros and Cons of Loan Against Property
| Pros | Cons |
|---|---|
| Lower interest rates than unsecured loans | Risk of losing property if repayments default |
| Higher loan amounts and longer tenures | Loan processing and legal documentation can be time-consuming |
| Flexible use of funds | Property valuation may be subjective |
| Helps consolidate expensive debts | Not suitable for those without property ownership |
Frequently Asked Questions (FAQ)
Q1: What interest rates can I expect on Loan Against Property?
Interest rates typically range from 9% to 13% per annum, depending on lender, credit score, and property type. Some lenders offer rates as low as 8.99%.
Q2: Can I use residential or commercial property as collateral?
Yes, both residential and commercial properties can be used, subject to lender policies and property valuation.
Q3: How long is the repayment tenure for LAP?
Tenures generally range from 5 to 20 years, which helps to keep EMIs manageable.
Q4: What happens if I default on Loan Against Property?
Since LAP is secured by property, default may lead to legal action and auction of the property to recover dues.
Q5: Is Loan Against Property the same as a home loan?
No. Home loans are specifically for buying or building a house, while LAP funds can be used for any purpose, using an existing property as collateral.
Published on: July 28, 2025
Published by: PAVAN
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