Taking a Loan Against Property (LAP) can be a powerful way to unlock capital using your residential or commercial property. But one key decision borrowers often overlook is choosing the right interest rate type — Fixed or Floating. Each has its own pros, cons, and suitability depending on market conditions and your financial planning.
In this blog, we’ll break down:
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The difference between fixed and floating interest rates
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Pros and cons of each type
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Ideal use cases
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Tax insights
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Official links and calculators to make informed decisions
What is a Fixed Interest Rate?
A Fixed Interest Rate remains unchanged for the loan tenure or a specific part of it (typically 3–10 years). This means your EMI (Equated Monthly Installment) stays constant regardless of economic fluctuations.
✅ Key Characteristics:
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Stability in repayments
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Not impacted by repo rate movements
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Slightly higher than floating rates initially
📌 Example:
If you lock in a fixed interest rate of 9.25% on your LAP for 10 years, your EMI will remain the same even if the RBI changes the repo rate during that period.
What is a Floating Interest Rate?
A Floating Interest Rate changes periodically based on the lender’s benchmark rate (RLLR, MCLR, etc.) which is influenced by RBI policy rates.
✅ Key Characteristics:
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EMIs can rise or fall
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Initially lower than fixed rates
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Great for short-term loans or falling rate scenarios
📘 Learn more from RBI’s official lending rate circular.
Comparison: Fixed vs Floating LAP Interest Rates
| Feature | Fixed Rate | Floating Rate |
|---|---|---|
| Interest Rate | Constant throughout tenure | Changes as per market |
| EMI | Fixed | May increase/decrease |
| Stability | High | Medium to Low |
| Linked to RBI Repo Rate | No | Yes |
| Best For | Long-term stability | Short-term savings / falling rates |
Loan Against Property Interest Rate Today
Many banks offer both options, but floating is becoming more common. Here’s a general idea:
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Fixed LAP Rates: ~9.25% – 11.50%
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Floating LAP Rates: ~8.60% – 10.90% (subject to credit score & property profile)
✅ Check real-time offers using the Loan EMI Calculator before applying.
Tax Benefits of LAP: What You Should Know
LAP does not provide direct tax benefits like home loans unless funds are used for business purposes.
✅ However, under Section 37(1) of the Income Tax Act, interest paid on LAP for business use can be claimed as a business expense.
Factors to Consider Before Choosing Rate Type
1. Loan Tenure
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Short tenure? → Floating can be cheaper.
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Long tenure? → Fixed provides stability.
2. Market Outlook
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If RBI is expected to raise rates, locking in a fixed rate is safer.
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If rates may fall, floating could save money.
3. Risk Appetite
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Risk-averse borrowers prefer fixed.
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Risk-tolerant borrowers may gain from floating.
4. Credit Score
A good CIBIL Score (>750) can unlock better LAP deals, especially floating options.
Borrower Rights & Transparency
Lenders must follow guidelines set by SEBI and National Housing Bank.
✅ For more, refer to:
Expert Tip: Hybrid Interest Rate Option
Many Indian lenders now offer Hybrid LAP Rates, where:
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First 2–5 years = fixed rate
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Then auto-shifts to floating
It’s a great balance of both worlds and should be compared while applying.
✅ FAQs: Loan Against Property Interest Rate Comparison
1. Which is better — Fixed or Floating LAP interest rate?
If you want stability, go with fixed. If you want potential savings and can manage some risk, choose floating.
2. Can I switch from floating to fixed during my loan term?
Yes, many banks allow this with a conversion fee. Contact your lender directly for terms.
3. Does credit score affect interest rate type?
Absolutely. A better CIBIL score can reduce your floating rate by up to 0.5–1%.
4. Are floating rates risky?
They aren’t “risky” but are market-driven. Keep track of RBI repo rate updates.
5. What if RBI keeps increasing rates?
Then your floating EMI will rise. You can consider switching to fixed to stabilize.
6. Are fixed rates truly fixed?
Some banks offer partially fixed or “fixed for 2 years then floating.” Always read the fine print.
🚀 Conclusion
Both Fixed and Floating Interest Rates for a Loan Against Property have unique advantages. Floating rates offer savings in low-rate environments, while fixed rates provide peace of mind in uncertain times.
📞 Contact us today to get personalized LAP interest rate options.
🧠 Or use our free tool to check your eligibility instantly.
