Common Myth’s About Loan Against Property (LAP)

Common Myth’s About Loan Against Property (LAP)


Loan Against Property can be defined as secured, since the applicant provides their owned property as security against the loan. Generally, the lender lends around 50 to 80% of the loan applicant’s property value, although it varies from lender to lender. The loan can be used for a wide range of purposes from business expansion to debt consolidation. The core advantage of opting for one, is that the loan against property interest rate is lower compared to a personal loan.

However, there are several common misconceptions that surround a Loan Against Property. We will attempt to dispel some of these myths in this article.

Myth 1 – Difficult to get approval

Contrary to popular belief, getting a loan against property is quite easy. The borrower only needs to meet the eligibility criteria set by the lender. You can also apply online, which makes your profile assessment and loan processing easy.

Myth 2 – Interest Rates are high

Many assume that LAP interest rates are high, as property prices are increasing at a high rate and these exorbitant prices will reflect on the loan. But LAP is calculated on a diverse variety of factors. These include lending amount, property type, loan tenure, valuation of property etc. So, interest rates differ according to the lender. The interest rate can also be negotiated based on your credit score and valuation of property

Myth 3 – Cannot use the property kept as security

This myth is fairly common among many. However, this is completely false. As long as all payments are made on time, you are free to use your property as you wish.

Myth 4 – High Income is needed to avail LAP

You do not have to be in the high-income category to get an LAP. Though there is a minimum income required by lenders for salaried and self-employed people, as long as you can convince lenders of your ability to repay, you can get a loan easily.

Myth 5 – Sanctioned loan amount is based on price of property when purchased

This myth is again untrue. The lender determines the final loan amount based on your property’s current market value. This is calculated by the lender’s evaluators and a few other factors such as the collateral’s age and current condition. However, if the property is not properly maintained, it could fetch a lower sanction than actual value.

Myth 6 – Lender takes possession of the property

Yet another untrue statement. As long as there are no defaults on payments, you keep full possession of the property. This myth came from the procedure gold loans are handled, but when it comes to an LAP, all you have to do is provide property documents.

Myth 7 – LAP has a short tenure

Not at all. In fact, LAP usually has a longer tenure. Whereas other loans such as personal loans, home loans etc., have a shorter tenure.

Myth 8 – Only residential property is accepted as collateral

This is the most common misconception. However, this is definitely not the case. Residential, commercial and industrial properties are accepted as collateral.

Myth 9 – LAP can only be used for certain purposes

You can use the loan for any purpose, be it personal or business. It can be used for business expansion, higher education or working capital need.

So, as you can see these are some of the wrongly held opinions, which are not true at all. You can use an LAP for multiple purposes, and get it hassle-free. To get a Loan Against Property, you can approach a number of organisations, which provide MSME Loans as well as Loan Against Property. Some of them include Electronica Finance Limited, Tata Capital, ICICI Bank, Bajaj Finserv and many more.

Utilise the power of your existing assets, to fulfil your ambitions!

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