Busting 8 Common Myths About Loan Against Property

A loan against property (LAP) is a borrowing option where you can access funds by pledging your property as collateral. The process involves submitting the necessary documents to a bank or Non-Banking Financial Company (NBFC) for approval. Though obtaining a loan against property is straightforward, it is accompanied by several myths that can mislead borrowers and complicate the decision-making process.

Contrary to these myths, a loan against property is a highly viable option due to its low-interest rates and flexibility, especially when compared to other loan types like gold loans or personal loans. With regular, timely EMI payments, borrowers can enjoy the benefits of this secured loan. We’re here to bust these myths and shed light on the truth, so you can make an informed decision with confidence.

Myth 1: Loan against property is restricted to fully-owned properties.
The Fact: Properties with outstanding mortgages can also be used as collateral, provided the loan amount falls within the Loan-to-Value (LTV) ratio set by the lender. LTV represents the portion of a property’s value that can be financed through the loan.

Myth 2: Loan against property applies only to residential properties.
The Fact: Both residential and commercial properties can be pledged for a loan against property, given they meet the lender’s terms and conditions. Even getting a loan against agricultural land is possible.

Myth 3: Pledged properties cannot be used for any purpose.
The Fact: As long as you adhere to timely EMI payments, you retain the right to use, live in, or rent out the property. Only defaulting on the loan would transfer ownership to the lender.

Myth 4: Taking a loan against property is risky.
The Fact: LAP is a secured loan, offering safety and certainty. By pledging your property papers, you ensure repayment. If you have a steady income and a good credit score, LAP poses no undue risk.

Myth 5: Loan against property is only for the high-income group.
The Fact: While income is considered during evaluation, the loan against property eligibility depends on your ability to prove timely repayments and the value of the collateral (your property).

Myth 6: Funds can only be used for limited purposes.
The Fact: Unlike specific loans like home or car loans, LAP funds are versatile. You have the freedom to utilise them for any financial requirement without constraints.

Myth 7: Loan against property interest rates is high.
The Fact: Loan against property interest rates depend on various factors, including your credit score and property condition. Generally, LAP offers lower interest rates compared to personal loans.

Myth 8: Full property value can be availed as a loan.
The Fact: Typically, lenders approve only 70%-90% of the property value as the loan amount. This depends on factors like the property’s resale market value, age, location, and lender policies.

With these myths dispelled, you can confidently consider a loan against property for your financial needs. Alembic Kiara, a promising property in Vadodara, offers excellent investment potential. Explore our website for more information on this project and make wise decisions for a secure future.