What Are the Benefits of Loan Against Property?
A Loan Against Property (LAP) is a secured loan where you mortgage your residential or commercial property to get funds from a bank or financial institution. This loan is ideal for people who need a large amount of money for business expansion, medical expenses, education, or weddings. The key benefit is that you retain ownership of your property while using it to unlock high-value funds. With lower interest rates and longer repayment tenure, LAP is a smart financial choice for individuals and businesses seeking cost-effective funding.
What is Loan Against Property?
Loan Against Property means borrowing money by keeping your owned property as security. The lender provides funds based on the current market value of the property. The best part is that the loan can be used for any personal or professional need, and you continue to use the property during the loan tenure.
1. Lower Interest Rates
One of the biggest benefits of Loan Against Property is its lower interest rate compared to personal loans or business loans. Since the loan is secured with property, lenders offer better rates, usually between 8% to 11% per annum, depending on your credit score and income.
2. High Loan Amount
Banks generally offer 60% to 75% of the property’s market value as a loan. This makes LAP ideal for funding big expenses like higher education abroad, buying new machinery, or medical treatments. You can get amounts ranging from ₹5 lakhs to ₹10 crores based on eligibility.
3. Flexible Repayment Tenure
Loan Against Property offers longer repayment tenures, usually ranging from 5 to 20 years. This means you can choose smaller EMIs that suit your monthly budget. Longer tenure makes repayment easier without putting financial pressure on you.
4. Multipurpose Use of Funds
Another major advantage is that there are no restrictions on fund usage. You can use the loan amount for:
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Business expansion
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Medical emergencies
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Education fees
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Wedding expenses
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Home renovation
This makes LAP more versatile than home loans or education loans that have specific end-use restrictions.
5. Continued Ownership of Property
Even though the property is mortgaged, you remain the legal owner. You can continue to live in or rent out the property during the loan period. The property is only at risk if you fail to repay the loan.
6. Quick Processing and Disbursal
With proper documentation and a clean property title, loan approval is usually fast and hassle-free. Many banks offer LAP with online applications, doorstep services, and disbursal within 7–10 working days.
7. Better for Credit Profile
Timely repayment of LAP EMIs can improve your credit score and credit history. This helps in availing future loans at better terms and interest rates.
8. Tax Benefits (in Specific Cases)
While LAP doesn’t offer general tax benefits like a home loan, if the borrowed amount is used for business purposes, the interest paid can be claimed as a business expense under the Income Tax Act.
Important Points to Remember
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Keep a good credit score to get the best rates.
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Property should be free from legal disputes.
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Compare processing fees and prepayment charges before choosing a lender.
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Avoid over-borrowing—borrow only what you can repay comfortably.
Conclusion
The benefits of Loan Against Property make it a great financial tool for those who need a large amount of money at low cost. It provides liquidity while allowing you to retain property ownership. If you have a clear-titled property and need funds for important personal or business needs, LAP is a secure, low-interest, and flexible loan option worth considering.