Loan Against Property (LAP)
A Loan Against Property (LAP) is a type of secured loan where you pledge a property you already own—residential, commercial, or industrial—as collateral to a bank or financial institution in exchange for funds. Unlike a home loan, which is used specifically to buy or build a new house, a LAP provides you with a lump sum of money that can be used for any legitimate purpose.
Key Features
- Security: You must mortgage a fully constructed, freehold property. You retain ownership and can continue to use the property as long as you make timely repayments.
- Loan Amount (LTV): Lenders typically offer a loan-to-value (LTV) ratio of 50% to 75% of the property’s current market value. Some lenders may offer up to 80%.
- Repayment Tenure: These loans offer long repayment periods, often ranging from 5 to 15 years, and in some cases up to 25 years.
- Interest Rates: Since the loan is secured by property, the interest rates are generally lower than those for unsecured personal loans (e.g., ~8%–13% vs. ~10%–24%), though higher than standard home loan rates.
Common Uses for Funds
- Business Growth: Expanding operations, purchasing machinery, or meeting working capital needs.
- Personal Milestones: Financing higher education, a child’s wedding, or major home renovations.
- Financial Management: Debt consolidation (paying off high-interest loans) or managing unexpected medical emergencies.
Eligibility & Documentation
- Eligibility: Open to salaried individuals, self-employed professionals (e.g., doctors), and business owners with stable income and a clear property title.
- Documents: You will need identity/address proof (Aadhaar, Passport), income proof (salary slips, IT returns), and original property documents.
