Definition
Loan Against Property (LAP)
A loan against property is a secured loan where you mortgage residential or commercial property to raise funds for any purpose.
A Loan Against Property (LAP) lets you borrow by pledging an owned residential or commercial property while continuing to use it. It typically offers large amounts, long tenures and lower interest rates than personal loans, because the property serves as collateral.
The sanctioned amount is a fraction of the property's market value (the LTV), and end use is unrestricted — business expansion, education, weddings or debt consolidation. Approval considers both the property value and your repayment capacity.
The main risk is that default can result in losing the property. Unlike a home loan, the interest on a LAP is generally not eligible for tax deductions unless the funds are used for specific qualifying purposes.
Related terms
- Loan-to-Value (LTV) RatioLTV is the proportion of an asset's value that a lender is willing to finance through a loan.
- Secured vs Unsecured LoanA secured loan is backed by collateral the lender can seize on default; an unsecured loan has no collateral and relies on your creditworthiness.
- Top-up LoanA top-up loan is additional borrowing on top of an existing loan, usually a home loan, often at a similar low interest rate.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.