A loan against property (LAP) lets you unlock the value locked in your home, shop or land without selling it. Because it is a secured loan, it offers large amounts at relatively low interest, making it a popular choice for major expenses. Here is what you should know.
What is a loan against property?
A LAP is a secured loan where you pledge a residential or commercial property you own as collateral. The lender offers a loan based on the property’s market value, and you continue to own and use the property while repaying. You can use the funds for almost any legitimate purpose – business expansion, a wedding, education, medical needs or consolidating other debts.
How much can you borrow?
Lenders typically offer 50% to 70% of the property’s current market value as the loan amount. The exact figure depends on the property type, location, condition and your repayment capacity. Because the loan is backed by valuable collateral, sanctioned amounts can be much higher than an unsecured personal loan.
Interest rates and tenure
LAP interest rates are usually lower than personal loans – often in the range of about 9% to 14% – because the lender’s risk is reduced by the collateral. Tenures are also longer, commonly up to 15 years, which keeps the EMI affordable. The combination of a large amount, low rate and long tenure makes LAP suitable for big, long-term needs.
Eligibility and documents
To qualify, you must own a clear-title property and show a steady income to service the EMI. Lenders assess your credit score, income and the property’s legal and valuation status. Key documents include property papers, KYC proof, income proof and bank statements. A clean title and good repayment history speed up approval.
Things to keep in mind
Since your property is on the line, missing repayments can lead the lender to seize and sell it to recover dues. Borrow within your means and keep a repayment buffer. Also compare processing fees, valuation charges and prepayment terms across lenders before choosing.
Frequently asked questions
Can I take a LAP on a rented-out property? Yes, both self-occupied and rented residential or commercial properties are usually eligible.
Is the interest tax-deductible? It may be, if the funds are used for specific purposes like business or buying another home – check with a tax advisor.
Understand the risk to your property before borrowing. This article is general information and not financial advice.