LAP loan interest rates
Loan Against Property Interest Rates

Hidden LAP Loan Benefits, Eligibility, Interest Rate & Risks

Loan Against Property is a secured loan that lets you borrow money from a lender by putting up an immovable asset like a house or business property as collateral. The lender will hold on to the asset until you pay back the loan. This is a popular way to borrow money because you can get a big amount with a low loan against property or LAP interest rate and pay it back over a longer tenor.

Benefits of Loan Against Property

  1. Big ticket loans

Most properties are worth lakhs or even crores, so you can get loans for a lot of money. Moreover, Loan to Value (LTV)  is also high for LAP which is between 70% and 80%. For example, if your property’s market value is INR 1 crore, then you are eligible to get a loan amount up to INR 80 lakhs.

Read More: 7 Financial Needs That One Can Fulfil With Home Mortgage Loan

  1. Less interest 

Since it is backed by an asset, the interest rates for loans against property are usually lower than the interest rate on personal loans or gold loans. Depending on the lender, the interest rate starts from 8%. 

  1. Longer Tenor

You get a flexible tenor of 18 years which is relatively long.

LAP Eligibility—

These conditions make you eligible for a loan against property:

  1. You should be a resident Indian citizen
  2. Your age should be between 25 and 70 years. (70 years is the loan maturity age)
  3. You should be able to prove a steady source of income

In case you are a salaried individual, you must have been working in an MNC or a private or public company for at least 3 years. In case you are self-employed, you must be able to prove a steady stream of income.

Best Interest Rates for LAP Loan by Financial Institutions—

A loan against property is backed by a borrower’s ownership of a home, which serves as collateral for the lender. For salaried professionals, LAP loan interest rates start at 8.60% per annum, while for self-employed individuals, interest rates start at 8.10% per annum, which is the lowest interest rates arond the market, you get inspection by several banks.

This helps make loan repayments more manageable and more affordable. Mortgage loans of up to INR 5 crore are available to borrowers with payback periods of up to 18 years. 

Loan-to-value (LTV) ratio and other parameters determine the maximum amount a borrower can receive from a lender in terms of a mortgage. Depending on the lender’s quality, the LTV might range from 70% to 75% of the property’s market value.

Risks Associated with LAP—

  1. Longer approval period

This loan takes longer to approve than personal or gold loans. Lenders must verify the applicant’s asset ownership. They must do due diligence and evaluate other legal considerations. All of this takes time and therefore, so does approval and disbursal.

  1. No tax benefits

One of the other big problems with a loan against property is that there are no tax benefits. You can only claim tax benefits if you use the amount for home renovation or extension purposes.

  1. Bank of NBFC can sell your property

Since this is an asset-backed loan, the lender can sell your property to get the money back if you default on loan payment for a continued period of time. Compared to other loans, this is a big risk. In other words, you shouldn’t take out these loans unless you’re sure you can pay back the principal and interest on time.

Read More: The US and India Mortgage Sectors: A Comparison

In this guide, we have covered everything there is to know about loans against property. Hope we have made the process and decision of applying for this loan easier for you. 

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