LAP stands for Loan Against Property in banking. It is a type of secured loan where an individual or business can borrow money by pledging their residential, commercial, or industrial property as collateral. LAP has become one of the most popular loan options in India because it offers high loan amounts, lower interest rates compared to personal loans, and flexible repayment options.
What Is a Loan Against Property (LAP)?
A Loan Against Property is a credit facility provided by banks and NBFCs in which borrowers mortgage their owned property to get funds for personal or business use. The property remains in the borrower’s name, but the lender keeps the legal rights to the property until the loan is fully repaid.
LAP can be used for various purposes such as business expansion, education expenses, medical emergencies, wedding expenses, consolidating debts, or purchasing assets. Since it is a secured loan, lenders consider it low-risk and therefore offer competitive interest rates and longer tenure.
Types of Properties Accepted Under LAP
1. Residential Property: Self-occupied or rented-out houses or flats are commonly used for LAP.
2. Commercial Property: Shops, offices, or commercial buildings can also be mortgaged for higher loan eligibility.
3. Industrial Property: Some banks accept industrial units or warehouses, depending on eligibility criteria.
Key Features of LAP
- High Loan Amount: Borrowers can get 50%–75% of the property’s market value as a loan, depending on the lender’s policies.
- Lower Interest Rates: Interest rates are lower than unsecured loans since the lender’s risk is reduced with collateral.
- Flexible Repayment Tenure: Banks provide repayment periods ranging from 5 to 15 years, making EMIs more manageable.
- Continued Property Ownership: The borrower retains ownership and can continue using the property even while the loan is active.
Benefits of LAP
- Ideal for large financial needs
- Lower EMI burden due to longer tenure
- Faster processing when property documents are clear
- Can be availed by both salaried and self-employed individuals
Conclusion
LAP, or Loan Against Property, is a practical and affordable financing option for individuals and businesses who require large amounts of money without selling their assets. With its lower interest rates, flexible terms, and high loan eligibility, LAP continues to remain a preferred credit option in the Indian banking system.