Loan Against Property

Full form: LAP

Loans & Credit

Loan Against Property is a secured loan where your owned property (residential or commercial) serves as collateral. Offers significantly lower interest rates than personal loans (8-12% vs 14-22%) for large amounts.

In detail

LTV for LAP: typically 50-65% of property value (lower than home loan LTV). Use cases: business expansion, medical emergency, child education, consolidating high-interest debt.nnKey risks: default means losing the property (primary home if pledged). Not for consumption expenses or volatile investments. Use only when business or income justifies the property risk.

Formula

Max LAP = Property value x LTV (50-65%)nA Rs 80L property: LAP = Rs 40-52L

Real-life example

🇮🇳 India example

Vikram's Rs 1 Cr commercial property has Rs 40L outstanding home loan. Eligible LAP = Rs 1 Cr x 55% - Rs 40L existing = Rs 15L additional LAP. He uses this for his business expansion at 10.5% vs taking personal loan at 16%.

Frequently asked questions

Should I use LAP to invest in stock market? ▼

No. Pledging your home to invest in volatile markets is extremely risky. If markets fall and you cannot service the LAP, you lose your property. LAP is for productive, income-generating purposes only.