A Loan Against Property lets you unlock funds by mortgaging a residential or commercial property you already own, while continuing to use or occupy it. Because the loan is secured, LAP typically offers significantly lower interest rates than unsecured personal loans — but the property is at risk if repayments aren't made.
You mortgage a property (residential, commercial, or sometimes industrial) you own to a lender, who then disburses a loan amount based on a percentage of the property's assessed market value — the Loan-to-Value (LTV) ratio. You continue to use the property, but the lender holds a legal charge over it until the loan is repaid. If you default, the lender can initiate recovery proceedings against the property.
| Factor | Loan Against Property | Personal Loan |
|---|---|---|
| Security | Secured against property | Unsecured |
| Interest rate | Generally lower (secured loan) | Generally higher (unsecured) |
| Loan amount | Can be substantially larger, based on property value | Typically limited relative to income |
| Processing time | Longer — involves property valuation and legal checks | Faster — often disbursed within days |
| Risk if you default | Property can be repossessed/auctioned | No direct asset at risk, but credit score and legal recovery action possible |
See our personal loan vs credit card vs LAP comparison for a broader look at how these options stack up for different borrowing needs.
LTV ratios for LAP are typically lower than for home loans (which finance the purchase itself) — lenders generally cap LAP at a more conservative percentage of the property's current market value, with the exact ratio depending on the property type (residential properties usually get a higher LTV than commercial), location, and the lender's policies.
Unlike a home loan (where interest is deductible under Section 24(b) and principal under Section 80C, subject to conditions), LAP interest is generally not eligible for these specific deductions unless the loan proceeds are demonstrably used for the purpose that would otherwise qualify (e.g., purchase/construction/renovation of a house property, or for business purposes where it could be claimed as a business expense). Simply taking a LAP for personal use (like a wedding or travel) typically does not generate a tax deduction on the interest paid. See our home loan EMI guide for the tax treatment that applies specifically to home loans.
Eligibility depends on the property's clear title and valuation, your income and repayment capacity (similar to other secured loans), age, and credit score. Documentation typically includes property documents (title deed, sale deed, property tax receipts), income proof, and identity/address proof. The property valuation and legal due diligence process generally takes longer than for unsecured loans.