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Common Myths about Loans against Property


A loan against property provides the borrower with a big sum of money. The most common causes for this sort of loan are the start-up of a new company, marriage, or education for children studying abroad. Before you decide to take out a loan against your home, you should be aware of all the myths and reality.

Before taking out any sort of loan from a lender, one should be aware of the wrong information. Ensure that the conclusion you make is founded on facts and genuine data rather than market fallacies.

What Exactly Is a Loan against Property?

A loan against property, or LAP, is a credit obtained by holding your property as a mortgage with the lender. Banks in India often consider the property as a security cover if the loan borrower fails to repay the amount borrowed. If you do not repay the loan on time, the lender has the power to sell the property to reclaim the money.

One of the most crucial things to understand about LAP is that lenders only grant a specific proportion of the property’s market value. Banks often lend 50 per cent to 60 per cent of the property’s value. Other private lenders provide around 80 per cent of the property’s worth. LAP is a secured loan since you maintain the security with the lender.

Purpose of LAP

  • To pay for a medical issue
  • To help pay for your child’s marriage
  • To pay for the long-awaited trip
  • To grow your company
  • To pay for your kid’s education

Advantages of a Loan against Property

  • Lengthy Payback Term

LAP (Loan Against Property) has a long repayment term of up to fifteen years.

  • Reduced Interest Rates

In comparison to other unsecured products, such as personal loans, which often have high-interest rates, loans against property are low.

  • Reduced EMIs

The lower the EMI, the longer the tenure. Because the loan against property has a longer term, the EMIs are lower. As a result, the loan burden is reduced.

  • Simple to Obtain

You may easily get LAP since it is a secured loan and banks are eager to grant credit. If you own a home, you may mortgage it with a reputable bank to get a loan for your company or personal purposes.

Common Loan against Property Myths

Some of the most popular misconceptions about loans against property are listed here.

  • A loan with a higher interest rate is preferable to a loan against property

There is no question that with a solid credit history, the credit market provides loans that are better than loans against property. A loan against property, on the other hand, is a loan that will provide you with access to high-value cash at a cheap interest rate. It is a form of loan in which your property is held as collateral.

If you are certain that the payments will be made on time, you should never have to worry about maintaining your home as collateral. It takes forethought to maintain your property as collateral. So, if correctly planned, a loan against property is a very useful financial instrument that may help you retain financial stability.

  • The Pledged Property Cannot Be Exploited

People have the misperception that once a property is pledged, it cannot be utilised until the debt is paid off. This information is untrue, and the property may be used even if the loan’s term is not completed. If the borrower fails to make loan payments, the lender will take possession of the property. In the event of a default, the lender has the authority to sell the property to obtain money.

  • The Whole Worth of the Property May Be Borrowed

This is another common misunderstanding. You will never be awarded a loan for the entire value of the property. In general, the loan amount runs from 75% to 90% of the property’s worth. Though each lender’s policy and terms and circumstances vary, this is a basic amount. As a result, you should carefully evaluate the worth of your home before applying for a loan that meets your needs.

  • A Loan May Only Be Obtained against a Residential Property

In the market, this is simply not the case. The loan may be used to purchase both residential and commercial property. The loan amount may also be utilised to purchase commercial or residential property or to reduce lease payments.

  • You Must Have a Greater Salary to Qualify for This Loan

Borrower income may sometimes have an impact on loan applications. It represents the borrower’s capacity to repay the loan amount within the time frame stipulated. This is not the case with loans secured by real estate. You may simply get the loan by pledging your property as collateral, and if your lender is pleased that you will be able to repay the debt within a certain time frame, the loan will be approved.

  • The Interest Rate Is Very High

Personal loans have a higher interest rate than loans against property. The rate of interest for the latter option is determined by many variables, including the lender you pick, the state of the property, and your credit score. Because loans against property are secured, they are less expensive than personal loans. These loans also have a lengthier payback period when compared to personal loans on the market.


Loans against property are a wonderful choice to pick if you are searching for a loan in the market with no limits and may pledge a property. The loan may be customised to your specific financial needs and payback capabilities. People choose a loan against property rather than a personal loan because a loan against property is cheaper. Taking all properties of LAP, It offers a flexible technique for paying a substantial expense. The only drawback of the loan is that failure to repay it may result in the bank taking power over your property. To know more about such types of topics, visit Piramal Finance.