A Comprehensive Guide to Loan Against Property

When urgent financial needs arise, using the value of your owned property can be a smart and stress-free solution. A Loan against Property (LAP) allows you to access large funds at lower interest rates while keeping ownership intact. With longer repayment tenures and minimal restrictions on usage, this option is becoming a popular choice for business growth, education, or emergency expenses. In this blog, you will be provided with complete information on the loan against property.

What is a Loan against Property?

A Loan against Property (LAP) is a type of secured loan where you use your residential or commercial property as collateral to get a loan from a bank or financial institution. You continue to own and use the property while repaying the loan in easy EMIs. It is often used for business expansion, education, weddings, or medical emergencies.

Key Features of Loan against Property (LAP)

An LAP is one of the most reliable ways to raise funds without selling your valuable assets. The following details include the key features of a loan against property:

• Secured Loan with Property as Collateral: LAP is a secured loan, which means you offer your residential, commercial, or rented property as security to the lender. While the property is used as collateral, you retain ownership and usage rights throughout the loan tenure, provided EMIs are paid on time.
• High Loan Amounts (Up to 70% of Property Value): Most banks and NBFCs offer 60–70% of the market value of the pledged property as the loan amount. Some lenders may go even higher depending on your income, credit score, and the property type.
• Lower Interest Rates Compared to Unsecured Loans: Since LAP is backed by property, interest rates are lower than personal loans. As of 2025, rates generally range between 8.50% to 11.50%, which depends on your credit profile, lender, and tenure.
• Longer Repayment Tenure (Up to 15–20 Years): LAP usually comes with flexible repayment options, with loan tenures ranging from 5 to 20 years, which allows borrowers to manage EMIs according to their financial capacity.
• Multipurpose Use of Loan Amount: There are no restrictions on how you use the loan amount. You can use it for business needs, medical bills, education, wedding expenses, or any other personal or professional reason.
• Balance Transfer Facility Available: If you are already repaying a LAP with a higher interest rate, you can transfer the outstanding loan to another lender offering a lower interest rate, which helps you save money over time.
• Eligibility Based on Income and Property Type: Eligibility is decided based on your income, age, credit score, employment status, and property value. Both salaried and self-employed individuals can apply.
• Tax Benefits (In Some Cases): While LAP does not offer direct tax benefits like home loans, you may be eligible for deductions under Section 37(1) of the Income Tax Act if the loan is used for business purposes.

LAP Interest Rates:

The interest rate for a Loan against Property (LAP) typically ranges from 8% to 12.5% per annum. However, the exact rate depends on several factors:

LAP Interest Rate Range by Lender Type

Factors Affecting the Interest Rate:

• Type of Property – Residential usually gets better rates than commercial.
• Property Value – Higher value = better loan terms.
• Loan Amount & Tenure – Larger loans over longer tenure might attract higher rates.
• Credit Score – Higher (750+) = lower interest.
• Income & Financial Profile – Stable income and strong repayment history help.
• LTV Ratio (Loan-to-Value) – Lower LTV means less risk to lender, better rates.
• Lender Type – Banks offer better rates than NBFCs, but NBFCs are more flexible.

Example (June 2025 Trends):

• SBI property loan interest starts from 9.15% p.a.
• HDFC Bank property loan interest starts from 9.25% p.a.
• ICICI Bank property loan interest starts from 9.40% p.a.
• Axis Bank property loan interest starts from 9.50% p.a.
• Bajaj Finserv (NBFC) property loan interest starts from 10.50% p.a.
• PNB Housing property loan interest starts from 10.25% p.a.

How to Apply for a Loan Against Property?

Applying for an LAP is a straightforward process if you follow the right steps and have your documents ready. Whether you need funds for business expansion, education, or medical emergencies, the steps will help you apply smoothly and get your loan approved faster.

Step 1: Check Your Eligibility

Before applying, you need to ensure that you meet the basic eligibility criteria. You should be:

• An Indian citizen (salaried or self-employed)
• Aged between 21 and 65 years
• Earning a steady monthly income
• Owning a residential, commercial, or rented property that is free of legal disputes

Lenders will also check your credit score (preferably above 700) and current financial obligations.

Step 2: Compare Loan Offers

Don’t settle for the first offer. Use online loan comparison tools to check:

• Interest rates (ranges from 8.50%–11.50%)
• Maximum loan amount (up to 70% of property value)
• Repayment tenure (up to 15–20 years)
• Processing fees and prepayment charges

Compare offers from banks like HDFC, ICICI, SBI, Axis Bank, and Bajaj Finserv for the best deal.

Step 3: Keep Your Documents Ready

Have these documents handy for a quick and smooth application:

• ID proof: Aadhaar card, PAN card, or passport
• Address proof: Utility bills, Aadhaar, or rental agreement
• Income proof: Salary slips (for salaried), ITR and bank statements (for self-employed)
• Property documents: Title deed, ownership papers, and latest property tax receipts
• Photographs and Form 16/ITR returns

Step 4: Fill Out the Application Form

You can apply online or visit a branch. Most banks now offer a digital application process:

• Visit the official bank/NBFC website.
• Go to the “Loan Against Property” section.
• Fill in your name, income, loan amount needed, and property details.
• Upload scanned documents or book a document pickup.

Step 5: Property Valuation and Verification

Once your application is submitted, the lender will:

• Verify your personal and financial details
• Conduct a technical and legal evaluation of the property
• Send a representative for a property inspection

Step 6: Loan Approval and Disbursement

If everything checks out, the bank will approve the loan and send you a sanction letter with the loan terms. Once you accept, the loan amount is disbursed to your account, usually within 5–10 working days.

Documents Required for Property Loan

The following details include the documents needed for an LAP:

• Identity proof, like PAN card, voter ID card, Aadhaar card
• Address proof, like a passport or utility bill
• Income proof for salaried individuals, like last 3 months’ salary slips, latest Form 16 or income tax returns, or last 6 months' bank statements
• Income proof for self-employed individuals, like last 2-3 years ITRs with computation, business registration proof or GST certificate, last 6 months’ current account bank statements, or profit and loss account with balance sheet that should be CA certified
• Property documents, like latest property tax receipts, approved building plan, occupancy certificate (if applicable, or encumbrance certificate to show the property is loan-free
• Passport-size photographs
• Loan application form (filed and signed)
• Existing loan details (if any)

Interest Rates for LAP

The details below include the interest rates by top banks for a loan against property:

Loan Against Property vs. Personal Loan

The following details include the comparison between an LAP and a personal loan:

Tips Before Applying for LAP

Applying for a Loan Against Property (LAP) can be a smart move when you need a large amount of money for personal or business needs. Here are some important tips to follow before applying for LAP in India in 2025:

Know the Market Value of Your Property

Before approaching a bank or NBFC, find out the current market value of your property. Lenders usually provide 60% to 75% of the property's market value as a loan. Residential or commercial properties can be used, but they must be owned and legally clear. Get your property evaluated by a certified valuer. This helps you know what to expect from the bank.

Check Your Eligibility and Documents

Lenders look at your income, credit score (preferably 750+), property documents, and employment status before approving LAP. You will need to submit documents like:

• Property ownership papers
• Income proof (ITR/salary slips)
• Identity and address proof
• Existing loan statements

Check eligibility online using loan calculators on official bank websites like HDFC Bank or ICICI Bank.

Compare Interest Rates and Processing Fees

Interest rates for LAP in 2025 range from 9% to 11.5% p.a. Rates vary by lender and borrower profile. Also, check processing fees (0.5%–1.5%), prepayment charges, and hidden costs. Use comparison platforms like BankBazaar or Paisa Bazaar to find the best deal.

Understand the Loan Tenure and EMI

LAP offers longer tenures (up to 15–20 years) and lower EMIs than personal loans. Choose a tenure that suits your repayment capacity. You can use an online EMI calculator to plan in advance. Don’t overburden your monthly income. Keep EMI below 40% of your income.

Read the Fine Print

Always go through the loan agreement thoroughly before signing. Pay special attention to clauses related to:

• Interest type (fixed/floating)
• Foreclosure or part-payment rules
• Penalties on delays

Clarify any doubts with the bank’s representative before signing.

Maintain a Good Credit Score: Your CIBIL score plays a big role in approval and interest rate. A score of 750 or above gets you better deals. Check your credit report for free once a year on CIBIL’s official site.

Use LAP for Productive Purposes: Since LAP involves high-value assets, use the funds for growth-oriented needs like business expansion, higher education, or medical emergencies, not for luxury expenses.

An LAP is a powerful tool to meet big financial goals without losing ownership of your assets. But smart planning is key. Always compare offers, read the fine print, and borrow within your means. If used wisely, LAP can be your safest path to stress-free funding. This article provided you with a comprehensive guide on a loan against property.