Loan against property (LAP) is a loan wherein you pledge your property- commercial or residential- for a sum of money that the lenders lends you for a specified period of time.

Features of loan against property (LAP):

- Easy sanctioning - LAP is a secured loan. Banks/non-banking finance companies (NBFCs) maintain a margin in 50-90% range of the value of the property.

- Longer tenure - Usually banks sanction a LAP between Rs. 3 lakh to Rs. 100 crore. It is the only loan facility other than a housing loan that allows banks/NBFCs to have a tenure exceeding 10 years. Banks are willing to sanction loans against property (LAP) with tenures extending up to 15 years.

- Lower interest rate - In comparison with personal loans, LAPs have a lower rate of interest. The reason for this is that in the latter, security or collateral is offered to the banks/NBFCs in the form of the property.

- Lower EMI - When you have longer tenure and a lower interest rate than personal loans, the equated monthly instalments (EMIs) are bound to be lower.

- Flexibility - Various banks have flexible loan products such as term loans and overdraft facilities under LAP. A borrower doesn’t enjoy this flexibility with personal loans.

- Tax benefits – A borrower gets income tax benefits on availing a LAP for home renovation purposes. Usually, customers go for home renovation loans if they have to carry out repairs to the same property to be mortgaged to the bank. You might carry out repairs to your home by availing a LAP by mortgaging another property. However, under such circumstances, you have to prove that the end use of the loan is for carrying out renovations to the property you reside in.