What is a Loan Against Property and How Does it Work

A Loan Against Property (LAP) is a type of secured loan where a borrower pledges their property as collateral to a lender in exchange for funds. This property can be residential, commercial, or even a piece of land. The loan amount is typically a percentage of the property's current market value.

How It Works
Application: The borrower applies for the loan by submitting required documents like identity proof, address proof, income proof, and property documents.

Property Valuation: The lender assesses the market value of the property to determine the eligible loan amount. Generally, lenders offer up to sixty to seventy percent of the property's value.

Loan Approval and Disbursement: Once the documentation and valuation are complete, the loan is approved and disbursed to the borrower's bank account.

Repayment: The borrower repays the loan in the form of monthly installments over a fixed tenure, which can range from five to fifteen years or more.

Ownership: The borrower retains ownership and can continue to use the property, but the lender holds the legal right to take possession if the borrower defaults on the repayment.

Loan Against Property is commonly used for large expenses such as business expansion, education, or medical emergencies due to its lower interest rates compared to unsecured loans.