The Dos and Don’ts of Loan Against Property Finance Companies


A loan against property is where an individual or businessman raises money in a short period of time by mortgaging property. These loans are also called secured loans and are backed by the assets or property that you own. These kinds of loans help you to tackle emergency situations like a medical emergency or important events like marriage, to purchase machinery for business, or start a business. There are banks or NBFCs that finance companies for loans against a propertyThe loan can be taken against the residential or commercial property. These loans also have the benefit of having lesser interest rates compared to any personal loan or business loan.

One important thing in a loan against property is that borrower will get a certain percentage of the property’s market value and not the exact value. You can easily get funds by providing certain documents for a loan against a property.

Benefits of Loan Against Property (LAP)

When it comes to funding loan against property is a better option, and there are many benefits one can avail. Below are some benefits of getting a Loan Against Property:

·        A borrower can get a good amount of money against their asset/property. The borrower can get 60-70% of the amount of the total value of the property. Also, the sanctioned amount depends on the nature of the property, whether it’s a residential or a commercial one.

·        The interest rate on these loans is lower compared to other loans, such as business or personal loans. The main reason for the lower interest is that the lender’s risk is reduced as they have the property as security.

·        The tenure periods of Loan Against Property (LAP) are longer. An individual can pay the amount comfortably.

·        You can manage all your bigger expense by getting bigger amounts against your assets

·        Not changing of the owner-Even after mortgaging the property, the ownership of your property does not change, and you can continue to use it.

The Do’s of Loan Against Property

  • An individual needs to analyze the risk in case of a loan against property as it makes your property vulnerable. This point one should keep in mind if there are chances of any uncertainty. However, if you have all things in place, then you need not worry about the same.
  • Before taking a loan against the property, it is advisable to calculate the instalments as these loans have longer tenures but have the high-interest rates. You may end up paying much more amount in interest payments. It is better to take these loans for a shorter period of time.
  • Compare the loan offers between various banks and finance companies for loans against property.
  • Enquire with the bank about age eligibility criteria, as different banks have different criteria

·        A borrower should know the value of the property- The amount you will get depends on the value of the property as the lender disburses 60-70% of the amount of the total value of your asset. That may or may not meet your requirement of money of you do not keep this thing in mind.

The Don’ts of Loan Against Property

Do not fail to make payments for your monthly EMIs. This will lead to late payment charges and can lead to downgrading your CIBIL score.

  • Try to take a loan amount that you can easily pay back. Even though you need a big amount that is more than the worth of your property, it would still be a better idea to borrow a lesser amount as per your capacity.
  • Not comparing interest rates, processing fees, tenure, etc. The Interest rates determine how much extra you are going to pay for the amount you will borrow. Your interest rate also depends on your credit score, so make sure to maintain the same. Also, you can negotiate with low-interest rates.
  • Lenders also take time and evaluate your property and credit worthiness. One should keep in mind that it will take time to process. So, plan accordingly.

Documents for Loan Against Property

Below are the documents that require to apply for a LAP (Loan Against Property):

  • Pan Card
  • Aadhar Card
  • Landline bill
  • Utility bill
  • A salaried person needs to provide income tax proof and a bank statement 
  • House Tax receipt
  • ITR for the last three years in case of self-employed

Post submitting the documents for a loan against the propertyborrower needs to wait for a week or two as the lender will take time to know the creditworthiness and will evaluate the property.


Considering all the important points, an individual who is salaried or self-employed can opt for a Loan Against the Property (LAP). An individual can contact finance companies for a loan against the property after comparing the interest rates and other charges.

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