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Know the Basic Idea of Loan Against Property (Beginners Guide)

Beginners Guide To Loan Against Property

What is a Loan against Property or LAP?

When you avail a loan by keeping your property as collateral then it is called Loan Against Property (LAP). Now this property can be a commercial as well as residential property. LAP is the most secured term of the loan for the bank, as the guarantee is a property of the owner. This can be taken for the loan of educating the child, marriage, business start-up, any other personal reasons. Most favorably by the banks too as it can be a no loss deal for them.

This loan comes under secured loan as you give a guarantee of repayment using the property as the security. The amount of loan is decided based on the market value of your property.

Here are few points that you need to know about LAP

How much loan can I get against a property?

The value of your property plays a vital role in fixing your loan amount. Usually, lending institutes sanction a loan of, approximately, 65% of the value of the property. However, apart from the value of your property, the lending institution will also consider various checkpoints such as your payment record of other loans, your income, savings and the stability of your employment or business.

What are the documents that are required for LAP?

The basic documents starts from identity proof, address proof, income proof, age, educational qualifications to ownership documents of the property.

You may also need to provide the bank statements of the previous six months and the cheque for the processing fee.

How much is the rate of interest of loan against property?

The rate of interest on loan against property is determined based on several factors such as nature and value of the property pledged, loan amount, tenure, credit sore & history, income, existing EMIs, nature of employment, etc. as well as the lender’s policy at the time of loan application.

What is the tenure of loan against property?

The tenure for loan against property can be up to 15 years.

What can loan against property (LAP) be used for?

Loan against property is a fantastic way to arrange for funds when you want to meet any type of high expenses. One generally use LAP for the following purpose:
- To start up a business
- To buy a new property
- Further Studies
- Money for medical emergencies
- Foreign vacation

Documents to be as in attached with your application of getting the LAP:

These are the following documents that are required for LAP:
- Identity proof it can be in the form of adhaar card, driving license, voting card etc.)
- Possession letter stating that the you are the sole owner of the property.
- Your registry letter (property is in your name) by the tehsildar.
- Your income statement and bank statements for the previous six months if you are new to the bank then just the income letter and property ownership details will work.

Why you should opt for Loan Against Property?

Interest rates on Loan Against Property (LAP) is lower as compared to personal loan. The interest rate ranges from 12 to 16 percent, which makes it one of the cheapest loans after a home loan. The tenure of the loan can go up to 30 years, which can profitable with low EMI’s. In LAP maximum and minimum margins of loan is good enough to have it in for a personal. It depends on the valuation of property. In the application for loan usually, it is been charged as 65%of the value of your property.


Considering all these elements of LAP, it offers you a good option to raise money for financing a big expense. Probably the only disadvantage of the loan is that the inability of its repayment can lead to the bank taking possession of your property. Nevertheless, if you accurately plan your finances and the interest payments, the loan can be repaid smoothly.

Must Read : How to plan your Finances before Applying for a Home Loan?

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
CIN number: U65922TN2010PLC076972

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