Understanding Loan Against Property

Applying for a loan against property is a great way to meet the immediate financial needs. Since LAP is a secured loan, the interest rate is lower than a personal loan, and you can use the money for any purpose. Read on to know more about loan against property.

Loan Against Property or LAP is a secured type of loan in which you can borrow by keeping your property as collateral with the lender. The property can be a self-owned residential premise, a piece of land or commercial property. The good thing about applying for a loan against property is that you can get quick cash to meet the immediate financial needs. It is a much better option than applying for a personal loan as the interest rate for LAP is much lower, and you can get a higher loan amount and for a longer duration.

Let us look at some of the critical aspects of loan against property


Unlike the unsecured loans where the lenders consider your income as the most crucial factor to determine the loan amount, in LAP the lenders consider the value of the property pledged along with the income details to determine the loan amount. Additionally, lenders also consider your age and past credit repayment records.

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Documents required

You must fulfil specific documentation process to avail the loan. You must submit the loan application form along with documents relating to proof of identity, proof resident, income proofs (salary slips, income tax returns forms), property-related documents, and a property valuation report. Make sure that you provide authentic documents as the lender will verify all the documents before approving the loan.

Processing period

Once the lender verifies the information provided in your loan against property application form, and if the lender is satisfied that you meet their requirements, they will process the application. At this point, the lender will undertake a field visit to assess the property that you wish to pledge as collateral. So, if all the documents are clear, and the property assessment is done, the lender will disburse the amount.

Charges involved

A lot of people, especially first-time loan applicants, are unaware of the charges associated with LAP. Apart from the EMI, there are other charges applicable on loan, including processing fee, stamp duty, etc. The charges differ from lender to lender. Some lenders may charge up to 1.50% of the loan amount as processing fee plus the applicable taxes. So, beware of these costs and account for them in your financial planning.

Disbursement of loan

After the lender sanctions your loan application, you shall receive the amount directly in your bank account either as a lump sum amount or in instalment as agreed upon by you and the lender in the loan document.

Repayment of the loan

Generally, most lenders in India offer loan against property for a maximum period of 15 years. Also, there may be prepayment charges if you wish you to prepay the amount in full or partially before the end of the actual loan tenure.

Purpose of use

This is one of the significant benefits of availing LAP. The amount you borrow can be used for any purpose you want as long as you are not using it for illegal activities. You can use the amount for business expansion, paying medical bills, child’s education fee, home renovation, etc.

Thus, availing a loan against property is easy provided you meet the lender’s eligibility requirements. But, before you sign the loan documents, make sure to read the terms and conditions carefully and see if it is favourable to you.

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