What Is A Loan Against Property In 2023

Apr 5th 2024
A Guide to Loans Against Property in India

A loan against property is a secured loan offered by banks and other financial institutions in which borrowers pledge property as a security against the borrowed amount. Depending on the borrower’s profile, one can give the security of a commercial or residential property. If you want to secure funds for any need and you don’t have any issue in pledging a property, getting a Loan Against Property is undoubtedly the best way for the property. There are several benefits of getting this loan that we will discuss in the later part of this post.

What Is A Loan Against Property (LAP)?

​​​A Loan Against Property (LAP) is a kind of secured loan that is offered against a property that is used as collateral. Individuals can provide owned land, commercial premises, or a house as an asset to avail of this loan.​​

Apart from the basic understanding of a Loan Against Property, it is necessary to understand that the borrow amount from this loan can be used for any purpose just like a personal loan. Some of the commonly done applications of this loan amount are home renovation, starting a business venture, hospitalization expenses, and several others.

How Does Loan Against Property Work?

A Loan Against Property allows people to get nearly 70-75% of the property value as a loan amount. For this, they need to submit the property documents along with several other docs to avail of such a loan. Once the document verification is done, the loan approval is granted. This is followed by the transfer of the loan amount to the borrower’s bank account. The documents of the pledge property will be in the possession of the lender until the loan amount is repaid as per the loan schedule.

Types Of Loan Against Property?

There are primarily three types of Loan Against Property including:

Loan for Lease Rental-

In this kind of loan, the borrower can pledge a rental property to secure the loan amount. In regard to Lease Rental Discounting, the amount is provided to the borrower against the expected rental income from the property. The rent received from the property is sent to the lender.

Loan Against Residential or Commercial Property-

In this case, the pledged asset can be a residential or commercial property which is put by the borrower against the loan amount. This type of LAP is a good choice for those who own a property and seek to get funds for their benefits by using their property as collateral.

Loan For Commercial Property-

This Loan Against Property enables borrowers to use a property as collateral to get commercial property. This approach of securing funds is great among traders or business owners as it enables them to get bigger and more luxurious office space, a manufacturing unit, or even a warehouse.

Home Loan Vs Loan Against Property Difference?

Home Loan


Loan Against Property

A person can apply for a Home Loan even if the property is under construction or the person wants to buy a new house


It is for those who want to seek funds against a Collateral that could be a residential or commercial property. The secured funds can be used for any purpose.

The borrower can get 85-90% of the property value


In most cases, lenders give a loan amount of 65-70% of the property's market value. The amount varies between a residential and a commercial property

Interest rates vary between 6.75% - 10%,  given the specific lender and the chosen loan amount


Rates range between 7.35% - 10.5%  given the chosen bank and the borrowed amount

Eligibility For Loan Against Property-

 Contrary to unsecured loans, a Loan Against Property is a safer and more effective way to secure funds on a property. The loan amount will be finalized by the lender given the market value of the property to be pledged and your existing income. The loan amount and repayment criteria will also be dependent on the borrower’s age and CIBIL score.

Documents For Loan Against Property-

Just like other types of loans, the most commonly asked documents for an LAP are income proof, address proof, identity proof, property docs, property valuation report, etc. Make sure to stay true to the documents you submit during the loan application as the same will be verified.

Loan Processing-

The lender tends to process your application for a Loan Against Property after reviewing the furnished information and being assured that the borrower will stay true to the repayment commitment. A field visit may be carried out to evaluate the property that will be used as collateral.


In addition to the loan's relevant interest rate, the lender may also charge a processing fee, mortgage stamp duty, and other fees.

Loan Disbursement-

The loan is disbursed when all requirements have been completed and the loan has been sanctioned. The loan can be issued in one payment or up to three payments, which may or may not be spaced out over a period of time, depending on the loan's amount.

Related Posts;


1. What Is A Loan Against Property (LAP)?

A Loan Against Property is a secured loan where borrowers pledge a residential or commercial property against the loan amount. The borrowed amount can be used by any purpose.

2. What Are The Different Types Of Property I Can Pledge Against A LAP?

One can easily pledge either a residential property or a commercial property to avail of a Loan Against Property.

3. How Can I Repay The Loan?

It is very easy. The borrowed amount needs to be repaid in the form of Equated Monthly Installments (EMIs). The EMI date and amount will be confirmed at the time of loan disbursal.


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