Introduction
A Loan Against Property (LAP) is one of the most trusted financial tools for individuals and business owners looking to raise large sums of money by leveraging their owned real estate. Unlike personal loans, LAP is a secured loan that comes with better terms and flexibility. Whether it’s for expanding a business, funding a child’s education, or consolidating debt, LAP offers significant advantages that make it a preferred choice for many Indians.
According to the Reserve Bank of India, secured loans like LAP are witnessing growing demand due to their structured repayment, lower risks for lenders, and flexibility for borrowers. Here’s a breakdown of the top 5 benefits that make LAP an attractive option.
1. Lower Interest Rates Compared to Unsecured Loans
One of the most compelling advantages of a Loan Against Property is its lower interest rate. Since the loan is secured by collateral (your residential or commercial property), lenders consider it less risky and thus offer better rates.
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Typically, LAP interest rates in India range from 9% to 12%, which is much lower than unsecured personal loans that often range from 12% to 24%.
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For example, HDFC Bank offers LAP starting at competitive rates based on the borrower’s profile.
📌 This benefit translates into lower EMIs, making the loan easier to manage over the long term.
2. Higher Loan Amount Based on Property Value
With LAP, borrowers can avail a significantly larger loan amount, often up to 60–75% of the market value of the property.
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For instance, ICICI Bank allows eligible applicants to borrow up to ₹5 crore depending on income and property valuation.
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This makes LAP ideal for high-ticket expenses like business expansion, overseas education, or medical emergencies.
Since the loan amount is tied to the fair market value of your property, maintaining updated property records and clear ownership helps maximize your eligibility.
3. Longer Repayment Tenure = Flexible EMIs
Loan Against Property offers longer tenures ranging from 10 to 20 years, unlike personal loans which typically cap at 5 years.
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Axis Bank and other institutions allow flexible tenures up to 15 years.
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A longer repayment period means lower EMIs, making it easier for salaried and self-employed borrowers to manage monthly cash flow.
Additionally, prepayment or part-payment options are often available with minimal or zero charges, depending on the lender and type of loan.
4. Multipurpose Usage of Funds
Unlike home loans (which are restricted to purchasing or constructing property), funds availed through LAP can be used for any legitimate purpose.
Popular use-cases include:
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Business working capital or expansion
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Children’s education abroad
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Marriage or family functions
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Consolidation of high-interest debt
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Emergency medical treatments
As per Investopedia, this versatility is a hallmark of mortgage-backed financing. Borrowers can even use LAP to clear other loans, improving their credit profile.
5. Ownership Retained, Asset Utilised
One of the most underrated yet crucial benefits of LAP is that you retain ownership of your property even while availing substantial funds from it.
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Only a lien is placed by the lender, and ownership remains with the borrower.
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Upon full repayment, the lien is removed, and you regain complete control over your asset.
According to CIBIL, timely repayment also boosts your credit score, enhancing your creditworthiness for future borrowing.
Conclusion
A Loan Against Property is more than just a financial product—it’s a strategic way to unlock the value of your hard-earned asset without losing it. With lower interest rates, longer tenures, flexible usage, and high eligibility, LAP emerges as a cost-effective and smart choice for anyone in need of big-ticket funds.
Whether you’re an entrepreneur looking to expand operations or a parent seeking educational funding, a LAP can meet your needs while keeping your assets safe.
FAQs About Loan Against Property in India
1. What types of properties can I mortgage for a LAP?
You can pledge residential, commercial, or even rented property. As per Bank of Baroda, all legally owned properties with a clear title are eligible.
2. Does LAP affect my credit score?
Yes. Timely repayment positively impacts your CIBIL Score, while delays or defaults can reduce it significantly.
3. Are there tax benefits on LAP?
LAP doesn’t offer direct tax benefits like home loans. However, if used for business purposes, interest paid can be claimed as an expense under Income Tax Act Section 37.
4. Can NRIs avail Loan Against Property in India?
Yes, NRIs are eligible for LAP subject to documentation and KYC norms, as outlined by RBI NRI lending norms.
5. What is the processing time for LAP?
Processing usually takes 7 to 15 days depending on property verification and documentation, as per SBI’s LAP process.
6. Can I foreclose my LAP early?
Yes, most banks allow foreclosure. NBFCs and private banks may charge a nominal penalty—check your lender’s foreclosure policy on their official website like Bajaj Finserv.
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