Loan Against Property: Myths & Realities

Loan Against Property (LAP) has become a popular financial instrument in India, enabling individuals to access substantial funds by releasing the value of their property. This secured loan allows the borrower to use the funds for a variety of purposes, making it an attractive option for those in need of substantial financial assistance. However, misconceptions and falsehoods regarding LAP have caused confusion among prospective borrowers.

In this extensive article, we will examine the most important aspects of LAP, including interest rates, eligibility requirements, proof of income requirements, and the advantages of using a Loan Against Property Calculator. To comprehend the realities of LAP in the Indian context, we will also investigate the offerings of prominent lenders such as SBI Loan Against Property and HDFC Loan Against Property.

Myth 1: Loan Against Property Interest Rate Is Unaffordable

Reality: One of the prevalent misconceptions about LAP is that the interest rates are excessively high, making it an expensive borrowing option. In reality, however, LAP interest rates are competitive and frequently lower than those of unsecured loans such as personal loans and credit cards. The interest rate is based on factors such as the borrower’s credit history, the loan amount, the loan term, and the market value of the property. Reputable lenders such as SBI Loan Against Property and HDFC Loan Against Property offer competitive interest rates, and applicants with excellent credit can negotiate even better terms.

Myth 2: LAP Can Only Be Used for Business Purposes

Reality: Some people believe that LAP is intended solely for commercial purposes. But this is not the case. While LAP is typically used for business expansion, working capital, or starting a new business, creditors have the option to use the funds for other personal purposes. These may include financing a college education, consolidating existing debts, managing medical expenses, paying for nuptials, or even purchasing another property.

Myth 3: LAP Requires Transferring Property Ownership to the Lender

Reality: There is a misconception that obtaining a Loan Against Property necessitates the transfer of property ownership to the lender. In actuality, the lender only places a lien on the property, which serves as loan collateral. The property remains in the borrower’s name for the duration of the loan. As soon as the creditor repays the loan, the lien is removed and property ownership is unaffected.

Myth 4: LAP Is Only for Homeowners

Reality: While it is true that householders can use LAP by pledging their residential or commercial property, LAP is not restricted to only property owners. Even individuals with undeveloped land can use it as collateral for a Loan Against Property. This incorporation of vacant lots broadens the range of property owners eligible for LAP participation.

Myth 5: LAP Is Difficult to Obtain Without Income Proof

Reality: Many prospective borrowers believe that LAP requires comprehensive income documentation, making qualification difficult for self-employed and non-salaried individuals. In reality, prominent lenders such as SBI and HDFC offer Loan Against Property without requiring strict income proof. Alternative documents such as bank statements, tax returns, or business financials are frequently accepted in lieu of the borrower’s income, making LAP accessible to a broader spectrum of individuals.

Myth 6: LAP Has Lengthy and Complicated Processing

Reality: Some consumers believe that the LAP application process is tedious and time-consuming. However, technological advancements have made LAP processing more streamlined and efficient. Numerous institutions provide online application services, which eliminates the need for physical documentation. This has drastically decreased the time required for loan approvals, making LAP a fast and convenient option for borrowing.

Myth 7: LAP Approval Is Difficult Due to Stringent Eligibility Criteria

Reality: There is a common misconception that LAP eligibility requirements are extremely stringent and limit access to the loan. In reality, LAP eligibility is determined by factors such as the borrower’s age, income, the valuation of the property, and credit score. Leading banks such as SBI and HDFC have comparatively lenient eligibility requirements, making their services more accessible to borrowers from diverse financial backgrounds.

Myth 8: LAP Is Only Suitable for Small Loan Amounts

Reality: Some people believe that LAP is only appropriate for minor loan amounts. However, LAP permits borrowers to access substantial funds dependent on the market value of their property. The loan amount is determined by the property’s appraised value and the lender’s loan-to-value (LTV) ratio, making it a viable option for those in need of substantial financial assistance.

Myth 9: LAP Will Lead to Loss of Property Ownership

Reality: Borrowers are frequently concerned that taking out a Loan Against Property will result in the loss of property ownership. However, as previously explained, the lender only places a lien on the property as security. As long as the loan is repaid in accordance with the terms, the borrower retains entire ownership and control of the property.

Myth 10: LAP EMI Calculator Is Complex and Time-Consuming

Reality: Using a Loan Against Property EMI Calculator may appear complicated to some borrowers. However, prominent banks provide online EMI calculators that are straightforward and user-friendly. Borrowers can instantaneously calculate their monthly payments by entering key information such as the loan amount, term, and interest rate, enabling them to plan their finances effectively.


Loan Against Property remains an effective method for gaining access to substantial funds by leveraging the value of a person’s property. Understanding the realities of LAP and dispelling the misconceptions surrounding it is essential for making informed financial decisions. LAP offers competitive interest rates and is not limited to commercial use only.

The loan process is streamlined and made available to a wider spectrum of borrowers, including those who are self-employed. Using an EMI calculator facilitates financial planning by enabling borrowers to accurately assess their repayment capacity.

LAP can serve as an excellent resource for meeting diverse personal and business requirements in the Indian context if it is prudently borrowed and managed. Always consult with financial professionals to make informed decisions and ensure a successful LAP borrowing experience.


  1. Which bank is best for loan against property?

The best bank for a loan against property depends on various factors such as interest rates, processing fees, loan-to-value (LTV) ratio, repayment terms, and customer service. SBI Loan Against Property, HDFC Loan Against Property, ICICI Bank Loan Against Property, and Axis Bank Loan Against Property are some popular choices known for their competitive offerings.

  1. What is loan against property?

Loan Against Property (LAP) is a secured loan that allows individuals to borrow funds by pledging their residential or commercial property as collateral. The loan amount is determined based on the property’s market value and the lender’s LTV ratio, and borrowers can utilize the funds for various purposes.

  1. How to get a loan against property?

To get a loan against property, you need to follow these steps:

a. Choose a lender: Research and compare offerings from various banks and financial institutions.

b. Check eligibility: Verify your eligibility based on factors such as income, age, property value, and credit score.

c. Gather documents: Prepare the necessary documents, including property papers, identity proof, income proof, and bank statements.

d. Apply: Submit your application online or at the bank branch, along with the required documents.

e. Property evaluation: The lender will assess the property’s value before sanctioning the loan.

f. Loan approval: If your application is approved, you will receive the loan amount after completing the necessary formalities.

  1. How to get leads for loan against property?

To generate leads for loan against property, financial institutions often employ various marketing strategies such as online advertising, referrals, tie-ups with real estate agents, and direct outreach to potential borrowers based on their database.

  1. Which bank gives a loan against property?

Several banks and financial institutions offer loan against property, including State Bank of India (SBI), HDFC Bank, ICICI Bank, Axis Bank, Punjab National Bank (PNB), and others.

  1. Can I get a loan against property?

Yes, if you own a property with clear titles and meet the lender’s eligibility criteria, you can apply for a loan against property.

  1. How many days does it take for a loan against property?

The processing time for a loan against property varies from one lender to another. Generally, it takes around 7 to 15 working days, depending on factors such as the completeness of documentation, property evaluation, and internal processing procedures of the lender.

  1. How much loan against property can I get?

The loan amount you can get against your property depends on the property’s market value and the lender’s LTV ratio, which typically ranges from 50% to 70% of the property’s value.

  1. Can we get a loan against property?

Yes, both salaried and self-employed individuals can avail a loan against property by fulfilling the lender’s eligibility criteria and providing the required documentation.

  1. How much loan can we get against property?

The loan amount you can get against your property depends on the property’s market value and the lender’s LTV ratio. For example, if the LTV ratio is 60%, and your property is valued at ₹1 crore, you may be eligible for a loan of up to ₹60 lakhs.

  1. What is a mortgage loan against property?

A mortgage loan against property is another term used to refer to the Loan Against Property. It indicates that the loan is secured by mortgaging the property.

  1. How much CIBIL score is required for a loan against property?

Lenders usually prefer a CIBIL score of 650 and above for a loan against property. However, a higher credit score improves your chances of getting a loan at more favorable terms.

  1. How to calculate the loan against property?

You can calculate the loan against property using a Loan Against Property EMI Calculator available on the websites of most lenders. Enter the loan amount, tenure, and interest rate to get an estimate of the monthly installment.

  1. What is the process of a loan against property?

The process of a loan against property involves choosing a lender, checking eligibility, gathering documents, applying for the loan, property evaluation, loan approval, and disbursal. Refer to question 3 for a more detailed explanation of the steps involved in the process.


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