Loan Against Property Overview

Loan Against Property (LAP) or Home Equity Loan, as the name suggests, is simply a loan given against the mortgage of a pre-owned property. This is an unmonitored loan, wherein the loan is disbursed in the name of the borrower and the end-usage is not monitored by the lender. A loan applicant can leverage on his existing property and unlock its hidden market value. Simply put, Loan Against Property is a secured personal loan and the money can be used for any legitimate purpose - to fund business expansion, child education, marriage expenses and so



LAP is essentially an unmonitored loan, which means unlike Home Loan, end-usage of LAP is generally not monitored by any Bank or Lender. The funds are paid in the hand of the property owner and can be used for legitimate purpose as follows:

♦  Business Expansion for working capital or for buying machinery / raw materials etc.

♦  Children Education 

♦  Marriage Expenditure

♦  Acquiring any long term capital asset like Car, household goods etc.

♦  Any Medical expenditure

♦  Funding your dream vacation

♦  Any other capital expenditure


Maximum Loan:

♦  Lenders / Banks can fund up to 70% of the current market value of the property.


Maximum Term:

♦  Upto 15 years Mortgage LAP are available depending on various Bank Policies subject to the retirement age.


Property Type:

♦  Residential or Commercial or Industrial properties or even vacant plots can be taken as a security. Usage of the property can be self-occupied or in self-usage, let-out or vacant as the case may be.


Click here to Quickly check your LAP Eligibility....

Loan Against Property eligibility depends upon various factors. A few of them are listed below:


♦  Your income determines the amount of loan you are eligible for. Banks generally keep an EMI to Income ratio at 50% to 60%. 

♦  For Salaried profile customers, current monthly salary is considered.

♦  For Self-employed profile customers, income shown in Annual Income tax returns is usually considered. There are other income eligibility calculation methods also like Gross Turnover, Banking Surrogate, Existing EMI track record, GST method and so on.


Property Market Value:

Since this is secured loan against property, Banks get market valuation of property done from their empanelled valuers. They fund upto 70% of the current market value of the property


Tenure of the loan:

The longer the tenure you opt for, the more loan you are eligible for as the EMI amount decreases with increase in tenure.


Interest rate offered: 

If your interest rates are on a lower side, then the LAP eligibility will be higher and vice-versa as the EMI amount decreases with decrease in interest rate.


Existing Loans: 

In case you are paying EMIs on existing loans, then the LAP eligibility amount will come down to keep the EMI to income ratio at 50% to 60%.


Credit History:

Banks also check credit history of a borrower from CIBIL which stands for Credit Information Bureau India Ltd. It is a repository of information, which contains the credit history of commercial and consumer borrowers. CIBIL provides this information to its members in the form of credit information reports. Individuals can also access their own credit reports from CIBIL. For more information refer

Generally a Credit Score of 700 & above is considered GOOD. Many Banks these days are following CIBIL Score based Interest Rates, which means - Better your CIBIL Score, Better Interest Rate you will get!


To check your Cibil Score & get Report click here...


How do I know my eligibility? - Click Here

If you want a call back regarding LAP - Click Here 


Advantages of taking a LAP over a Bank CC Limit:

Loan Against Property

Bank CC Limit

End-usage is not monitored or checked and funds can be utilized for any legal purpose

End-usage should be strictly for working capital needs

Documentation requirement is easier, lesser and one-time, at the time of loan application only. No documents are usually asked after loan disbursement

Documentation is more tedious and cumbersome at the time of application. Moreover, the borrower needs to furnish stock statements, financial statements periodically to keep the CC limit alive

Interest rate and charges are more competitive and attractive

Interest rate and account maintenance charges are higher and more expensive

It is a fixed term loan, resulting in the principal getting paid-off over the years

In CC limit, the limit to the extent utilized remains outstanding always. The Debt usually never gets paid-off.


Advantages of taking a LAP over a Personal Loan or a Business Loan:

Loan Against Property 

Personal Loan / Business Loan

Interest rates and other charges are far lesser and attractive starting @ 9%

One of the most expensive means to raise a loan with interest rates of 15% and above

Longer loan terms up to 15 years in some cases

Terms are restricted to 5 years at the most

Lesser EMI burden per month

Heavy EMI burden due to shorter terms

Higher Loan eligibility due to lesser EMIs and longer terms

Lesser Loan eligibility due to higher EMIs and bank policies

Maximum Loan amount is virtually un-restricted and depending on the valuation of the property, can go up to 100 Crores

Most lenders usually restrict Loan amount to 50 lacs per borrower due to the obvious risks attached to an unsecured loan


Summing up, LAP is a secured multi-purpose loan with longer terms, lower EMIs and lesser interest rates compared to a Bank CC Limit or a Personal Loan.
If you want a call back regarding LAP - Click Here

 Tax Benefits:

Interest and other charges paid towards a LAP is a usual business expenditure and is allowed as a deduction from the borrower’s business income while filing his Income tax returns.

Under Section 37(1) of the Indian Income Tax Act: Borrower can claim tax exemption from a loan against property if the loan amount is utilized for Trade/Work/biz  purposes. In these cases, benefits can be claimed against interest paid and associated fees and charges incurred. These payables can be claimed as business expenses.


Various types of documents are required to submitted for a Loan Against Property Application:

♦  KYC Documents 

♦  Income Documents 

♦  Bank Statements 

♦  Existing loan details

♦  Property Documents

Generally the documents required are almost similar across all Banks; however they may differ with various banks depending upon specific requirement etc. 

For a Detailed list of Documents required for LAP - Click here....

Types of Interest Rate:

Fixed Interest Home Loan:-

A LAP with a fixed interest rate means that the interest rate remains fixed throug

hout the given loan tenure irrespective of any changes in the Bank’s policies or RBI’s policy changes. The interest rate levied on the amount you borrow will be fixed or constant, irrespective of the financial market fluctuations and policy changes. However, do not advise their customers to opt for a Fixed Rate of Interest due to applicability of Foreclosure / Pre-payment charges on fixed rate loans.

Click here to know about the latest Loan Against Property Interest Rates...


Floating Interest Home Loan:-

Most loans in India are given as Floating or Adjustable interest rate loan. In this, the interest rate is subject to change - increase or decrease based on Bank’s internal policies and RBI’s Monetary Policy norms. The interest rate is linked to a Benchmark rate like Base Rate or MCLR or Repo Rate and Margin or mark-up is added to this Benchmark rate to calculate the Effective Floating interest rate. The Benchmark rate is subject to change making the effective rate of interest varying or floating. 

Although Floating interest rates seem more volatile in nature, they are still preferred as the most commonly used rate type. The primary reason for the same is NIL applicability of Foreclosure / Pre-payment charges on floating rate LAP taken by Individuals other than for Business purposes.

Refer these Notifications of RBI wherein Floating Rate Term loans availed by Individual Borrowers do not attract Prepayment penalty:-

RBI Notification - Nil Prepayment Charges - Individual LAP other than Business

Click here to know about the latest LAP Interest Rates...


Both fixed interest and floating interest rates come with their own set of risks and advantages. Choosing the type of interest rate is a personal choice. Before making a decision, a thorough research with respect to fixed or floating rates from different lenders should be considered.

Fees & Charges:

Acquiring a Loan against property doesn’t only involve the cost of LAP interest but it also includes other charges and fees at various stages of taking the Lap. You must consider all these charges while comparing  the cost structure across banks. Following is the detailed fee structure incurred by banks at different loan stages:

Before Loan Disbursement:

  Processing Fees:

It is a fee payable at the time of submitting the loan application to the bank, which is normally non-refundable. The fees charged can go upto 1% in most Banks and even go upto 2% in few NBFCs. 

♦ CERSAI Fees:

CERSAI stands for Central Registry of Securitisation Asset Reconstruction and Security Interest of India. CERSAI is a central online mortgage registry of India. CERSAI was established to inspect mortgage frauds in which people take multiple loans against the same asset from different banks. 

Lenders have to register details of security interests created by them with the CERSAI, within 30 days of its creation. Hence, the LAP borrower is charged a nominal fee for this process as follows:

For Loan amount up to Rs 5 lakh:             Rs.50/-

For Loan amount above Rs 5 lakh:           Rs.100/-

♦ Legal & Valuation Charges:

Some Banks also charge the customer for legal assessment and technical valuation of the property. These are normally nominal and vary in a few thousand rupees. 

♦ Administration Charges:

A few Banks also charge administration fees. This is not included in the processing fee, and is non-refundable. These charges mostly include the lawyer fees, technical valuation charges and other verification expenses of Banks. All Banks have empanelled outsourced agencies for these valuations and verifications who are paid by the Banks for these reports. These reports are used to decide whether or not to sanction the loan.

♦ Insurance Premium: 

Few Banks also insist Borrowers to get various types of insurances done like Property Insurance or Life Insurance. On most occasions the insurance premium is added to the loan amount itself which increases the EMI to a certain extent.

♦ Franking charges:

This is a State government charge like stamp duty fee which is nothing but a tax levied by the state government (State wherein the property is situated), on the amount of Loan taken. Only a few states in India levy this charge like Maharashtra, Karnataka, etc.


After Loan Disbursement:

♦  Cheque Bounce charges: 

Banks charge between Rs.250 - 500 + GST for every bounced cheque towards the loan payment because of lack of funds in your account.

♦  Delayed EMI Penal Interest charges:

When there is a delay in the payment of your EMIs, Banks charge a Penal interest rate on the amount due which is much higher than the regular LAP interest rate, ranging from 2% to 3% of the amount due.

♦  Fees for issuing statements, copy of documents etc:

Asking for a Loan account statement, Repayment Schedule is Free of cost. However certain documents like Acknowledgement / List of original property documents, copy of property documents, copy of loan agreements, Principal outstanding letter etc. attract nominal charges which vary as per Bank / NBFCs.

♦  Rate Conversion Fees: 

When the interest rates fall usually the benefit is passed on to the loan Borrower by reducing the interest rate. However in many situations you may find that your interest rate is higher than the prevailing interest rate. In such a case, you can negotiate the new rate of interest from your Bank / Lender by paying a Conversion Fees. This varies from a few thousand rupees to a percentage fee of upto 0.50% of the outstanding loan amount. You can also consider switching over your Loan Against Property to a new Bank at a much lower cost by doing a Balance Transfer.

♦  Prepayment / Foreclosure Charges:

When the borrower prepays the loan before the loan tenure, banks charge a penalty which can go upto 5% of the principal outstanding amount. Though part-prepayment by the borrower (to a certain extent) does not attract any charges. However, this is now governed by RBI and on LAP availed by Individual Borrowers for purposes other than Business, it is NIL with no lock-in-period. 

RBI Notification - Nil Prepayment Charges - Individual LAP other than Business