Aug 29, 2023

Busting 5 Common Myths about Loan Against Property

by Godrej Properties Limited



Loan Against Property (LAP), a mortgage loan, is a secured financial option where you can utilize the residential or commercial property you own as collateral to avail a large sum of funds. A loan against property is also known as a mortgage loan. The property could be residential or commercial, and its value determines the loan amount. You can continue using the property while repaying the loan in agreed installments over a specified period.

Despite its benefits, several things need to be clarified surrounding LAP, leading to confusion among potential borrowers. Here are the top five myths about loans against property, enabling readers to make informed decisions.

Busting the 5 Common Myths about Loan Against Property

Myth 1 - You Cannot Use the Property You Pledged

One prevalent myth about LAP is that you cannot use it once you pledge your property. However, this is false. As long as you repay the EMIs on time, you retain full access to your property. However, late payments can lead to property repossession by the lending body. It is advisable to use an online Loan Against Property EMI Calculator to assess your repayment capacity before applying for the loan.

Myth 2 - Restricted End Usage of Funds

A common misconception is that there are limitations to using the loan amount obtained through LAP. In reality, like other loans, such as personal or gold loans, you can utilize the funds for various financial needs, excluding speculative or illegal purposes.

Myth 3 - One Can Pledge Only A Residential Property

You can pledge a residential property, commercial property, warehouse, or factory as collateral for Loan Against Property. Authentic documentation and up-to-date papers are essential for a smooth loan approval process.

Myth 4 - Borrow the Full Value of the Property

Many applicants believe they can borrow their property's total value through LAP. However, the loan amount approved depends on the property's valuation, typically ranging from 70% to 80% of the property's value. Factors like infrastructure, property age, and geographical stability also influence the loan amount.

Myth 5 - High-Income Bracket Required for LAP

While income does play a role in LAP eligibility, even individuals in the moderate-income bracket can apply for the loan. Lenders have different minimum income criteria for salaried and self-employed applicants. 

Conclusion: Understanding the Reality in LAP 

Loan Against Property is a versatile and beneficial financial option, but it's essential to debunk the myths about loan against property to make an informed borrowing decision. Understanding the reality behind these misconceptions empowers borrowers to utilize LAP effectively for their diverse financial needs. 


Q: Can I use a Loan Against Property for personal or business purposes? 

A: Yes, you can use LAP for various financial needs, including medical expenses, weddings, higher education, home or business expansion, etc., except for speculative or illegal purposes.

Q: Does the lender take full possession of the collateral property? 

A: No, as long as you repay the EMIs on time, the possession of the collateral property remains with you. The lender only holds the property documents until the loan gets fully settled.

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