Loan against Property (LAP)
A Loan against Property (LAP) is a secured loan where borrowers pledge their residential or commercial property as collateral to access funds for personal or business needs. This product is widely offered by banks and NBFCs, including HDFC Bank, PNB Housing Finance, IIFL Housing Finance, ICICI Bank, Axis Bank, Adhar Housing Finance, and others.
Key Features
- Purpose: LAP is a multi-purpose loan, allowing funds to be used for business expansion, education, medical emergencies, weddings, or any other legitimate need except speculative investments
- Loan Amount & Tenure: The sanctioned amount typically ranges from 55% to 70% of the property's market value, with repayment tenures up to 15–20 years, shorter than home loans
- Interest Rates: LAP interest rates are generally higher than home loan rates due to the increased risk for lenders. For instance, ICICI Bank offers LAP at rates starting from 8.75% per annum, while home loans may start as low as 6.80% per annum HDFC Bank and others have similar rate structures for LAP
- Processing Fees & Charges: Processing fees can be up to 2.5% of the principal outstanding, with additional charges for prepayment or foreclosure, especially if closed within the first year
- Eligibility: Eligibility is primarily determined by the value and title of the property offered as collateral, along with the borrower’s income and credit profile. Documentation and property verification are more stringent and time-consuming than for home loans
- Tax Benefits: LAP does not offer the same tax benefits as home loans, except in cases where the loan is used for acquiring or constructing a new home
- Repayment: Repayment options include flexible EMIs, but the tenure is typically shorter than home loans.
Major Lenders
- HDFC Bank: Provides LAP with flexible usage and competitive rates
- PNB Housing Finance: Offers LAP for both salaried and self-employed individuals.
- IIFL Housing Finance: Known for quick disbursal and minimal documentation.
- ICICI Bank: Digital application and quick processing for LAP
- Axis Bank: Offers LAP with balance transfer and top-up facilities.
- Adhar Housing Finance: Caters to lower-income groups with property-backed funding solutions
- Other NBFCs: NBFCs often have more flexible eligibility norms, making LAP accessible to a wider customer base.