A Loan Against Property or LAP loan is a secured loan one may borrow against a residential or commercial property. It is a preferred choice among people who want to unlock the value of their assets and get easy funds to cover various expenses at a low LAP loan interest rate. However, a few myths around it seed doubts in the mind of people, making them hesitant to obtain these lucrative funding options. Here, we will bust those notions around these loans to provide you with a clear vision.

1. Borrowers Cannot Use the Pledged Property

It is nothing but a ludicrous myth that people have created. It is clearly stated that the borrowers can continue using the property as before, even after pledging it as collateral. The loan provider seizes ownership only if the borrowers fail to repay the loan.

2. Borrowers Can Only Use a Residential Property as Collateral

This is also a false belief, as borrowers can obtain a Loan Against Property by pledging any belonging property. It can be a commercial property, warehouse, factory, or industrial building. However, you should check the eligibility criteria of your lender company for further clarity.

3. A Property Owner Can Borrow Full Value of the Property

Loan companies do not lend 100% of the property’s value as a loan. They have a limited LTV ratio, up to which they can finance a loan. Many reputable NBFCs provide up to 75% of the property’s value as a LAP loan.

Many people believe that the LAP loan interest rate is very high. In reality, secured loans are always cheaper than unsecured loans. The LAPs largely depend on the applicant’s income, credit rating, and repayment capacity. Compare the LTV ratio, interest rate, and other features of several NBFCs before applying for a Loan Against Property.

Must Read: 5 Important Tips to Get Lower Interest Rates on Property Loan