What is Loan Against Property (LAP)?
A Loan Against Property (LAP), also known as a mortgage loan, is a type of secured housing loan. Under this scheme, a person can obtain a loan (fund) by using their residential or commercial properties, like a house, shop, or land. In simpler terms, the borrower gives their house, shop, or loan to the lender (bank) as a guarantee (security) to get money. Most Indian banks, NBFCs, and HFCs offer loans against property for tenures of usually up to 20 years, and some may offer for even more years. The money given by the bank is usually a part of the property’s value, usually between 40% to 85%. Usually, it varies from lender to lender, and how the borrower’s credit.
Loans against property can be used for various purposes, like paying for education, medical bills, growing a business, or clearing old loans. Because the loan is given against something valuable, the interest rate is usually lower than loans without any guarantee. But if the person is not able to pay back the loan, the bank can take away the property. Many lenders also offer the Lease Rental Discounting (LRD) facility. This allows consumers to avail of loans by pledging the rental receipts of their tenants.