What is a Loan Against Property?

● Loan Against Property (LAP) is a secured loan where you mortgage your property (residential, commercial, or land) as collateral to borrow funds.

● It can be used for various purposes like business expansion, education, medical emergencies, or debt consolidation.

Features of Loan Against Property


FeatureDescription
High Loan AmountLoans can be availed for amounts as high as 50-70% of the property market value.
Lower Interest RatesSince LAP is a secured loan, interest rates are lower compared to unsecured loans. Rates typically range from 8% to 14% p.a.
Flexible TenureLoan tenure can range from 5 to 20 years, making EMIs more affordable.
No Usage RestrictionsFunds can be used for personal or business needs (except speculative purposes).
Retain OwnershipYou continue to own and use the property while it is mortgaged.

Eligibility Criteria for Loan Against Property

  • Age:
    Salaried: 21-60 years
  • Income Proof:
    Salaried: Monthly salary slips and Form 16. Self-employed: ITR and business financials for the last 2-3 years.
  • Property Type:
    Residential, commercial, or industrial properties are usually accepted.
  • Loan-to-Value (LTV) Ratio:
    The loan amount is capped at 50%-70% of the property’s current market value.
  • Repayment Capacity:
    Fixed Obligation to Income Ratio (FOIR) or Debt-to-Income Ratio (DTI) should meet lender requirements (typically 40%-60%).
  • Property Ownership:
    Clear ownership and legal title of the property are mandatory.


Documents Required for Loan Against Property

  • KYC Documents:
    PAN, Aadhaar, or passport for identity and address proof.
  • Income Proof:
    Salary slips (last 3 months), Form 16, or ITR for 2-3 years.
  • Property Documents:
    Title deed, encumbrance certificate, and valuation report.
  • Loan Account Statement:
    If you are transferring an existing LAP from another lender.
  • Bank Statements:
    Last 6 months’ bank statements to evaluate cash flow and repayment capacity.


Costs Involved

  • Processing Fee:
    - Typically 1%-3% of the loan amount.
  • Prepayment Charges:
    - Charges of 1%-5% on prepayment or foreclosure.
  • Collateral Valuation (if secured):
    - Charges for property valuation or legal checks.


Benefits of Loan Against Property

  • Large Loan Amount:
    Higher amounts compared to personal loans or unsecured loans.
  • Lower EMIs:
    Longer tenures lead to affordable EMIs.
  • Lower Interest Rates:
    Cheaper than personal loans due to secured nature.
  • Retain Property Ownership:
    Continue to use the property while availing funds.

Key Points to Note

  • Timely Repayment: Defaulting on EMIs may lead to the lender initiating the auction of the mortgaged property.

  • Partial Disbursement: Some lenders offer disbursal in tranches for large amounts.

  • Top-Up Loan: If you have an existing LAP, you can apply for a top-up loan based on the remaining property value.

When to Opt for a Loan Against Property?

  • When you need a large loan amount for long-term needs.

  • When you own a property with significant market value.

  • When you are looking for lower interest rates compared to personal loans.

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