What is loan against property?

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What is a Loan Against Property (LAP)?

A Loan Against Property (LAP) is a secured loan where you pledge your immovable property (like a house, flat, or land) as collateral to borrow money from a bank or financial institution.

Key Features of Loan Against Property:

Feature Description
Type Secured loan
Collateral Residential, commercial, or industrial property
Loan Amount Usually 50% to 75% of the property’s market value
Usage Business expansion, education, medical expenses, debt consolidation, etc.
Interest Rate Lower than personal loans (since it’s secured)
Repayment Tenure Can go up to 15–20 years
Ownership You continue to own and use the property unless you default

How Does It Work?

  1. You apply for a LAP by pledging your property.

  2. The lender evaluates the property’s market value.

  3. Based on that, the lender offers a loan amount (LTV – Loan to Value).

  4. You repay in EMIs (Equated Monthly Installments) over a fixed tenure.

  5. Once the loan is fully paid, the lien on your property is removed.

Types of Property Accepted:

  • Self-occupied residential property

  • Rented residential property

  • Commercial buildings

  • Plots (in some cases, but less common)

Benefits:

  • Lower interest rates compared to unsecured loans

  • Longer repayment tenure

  • You don’t need to sell your property

  • Large loan amounts are possible

Risks:

  • If you fail to repay, the lender can seize and auction your property.

  • The property stays mortgaged until the loan is fully repaid.

Who Can Avail It?

  • Salaried individuals

  • Self-employed professionals

  • Business owners

 

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