Loans against property (LAP) are a popular option for securing a loan. However, several myths surrounding this LAP and it also cause confusion. Let’s clear the myths in this blog!
A common myth about taking out a loan against your property is that you will definitely lose your property. This is not necessarily true.
The reality is: When you take a loan against your property, you still own it. The lender just holds a lien on it as collateral, meaning they have a legal claim on the property if you don't repay the loan. As long as you make your payments on time, you keep your property.
Many people think that loans against property are only for residential properties. However, you can also get such loans using commercial properties or land as collateral.
The reality is: You can get loans against different types of properties, including residential, commercial, and industrial. The main requirement is that the property must be free from legal disputes and have clear ownership.
Some people think you can’t use a property once it’s mortgaged for a loan.
The reality is: You can keep using the property as you like during the loan period. Whether you live in it or run a business from it, your use of the property won’t be affected.
Some believe that loans against property are only suitable for emergency financial needs.
The reality is: Loans against property are flexible and can be used for many things, like business expansion, education, medical expenses, weddings, and more. They are not just for emergencies.
It is a common belief that there are no tax benefits associated with loans against property.
The reality is: If the loan against property is used for business purposes, the interest paid on the loan can be claimed as a business expense, thereby providing tax benefits. Additionally, if the loan is used for renovating or repairing a house, you can claim tax deductions under Section 24(b) of the Income Tax Act.
Many assume that loans against property are only available to salaried employees.
The reality is: Loans against property are available to salaried employees, self-employed people, professionals, and business owners. While eligibility criteria might differ slightly, many people can qualify for this type of loan.
There is a perception that loans against property come with very high interest rates.
The reality is: Loans against property usually have lower interest rates than unsecured loans like personal loans. This is because the property is used as collateral, making the loan less risky for the lender.
A common myth is that you can borrow 100% of the property’s value through a loan against property.
The reality is: Typically, lenders offer a loan amount that is a percentage of the property’s market value, known as the Loan to Value (LTV) ratio. In India, this usually ranges between 70% to 90% of the property’s value.
| Myth | Reality | Important Point |
|---|---|---|
| Losing Property | You retain ownership as long as repayments are made on time | You do not lose ownership of your property when you take a loan against it. |
| Only Applicable for Residential Property | Can be availed against residential, commercial, and industrial properties | You can use residential, commercial, and industrial properties as collateral. |
| Cannot Use the Property | You can continue to use the property during the loan tenure | You retain full rights to use your property even after availing a loan against it. |
| Mostly Applicable for Emergencies | Loans against property can be used for various financial needs | Loans against property can be used for a wide range of financial needs, not just emergencies. |
| No Tax Benefits at All | Tax benefits may be available depending on the use of the loan | Loans against property can offer tax benefits, depending on the usage of the loan amount. |
| Only Available for Salaried Employees | Available to salaried employees, self-employed individuals, and business owners | Loans against property are available to salaried individuals, self-employed, and business owners. |
| High Interest Rates | Generally have competitive interest rates due to the secured nature of the loan | Loans against property often have lower interest rates than unsecured loans. |
| Borrow Full Value of Property | Loan amount is a percentage of the property’s market value (50%-70% LTV) | You can borrow up to 90% of the property’s market value, not the full amount. |
Understanding how loans against property really work can help borrowers make better decisions. By clearing up these common myths, we aim to provide clear information and encourage more people and businesses to consider this option for their financial needs.
How can EazyBankLoan help you in taking a loan? We understand the process of procuring a loan can be stressful. That is why we take care of your Loan application process, saving you time and hassle by handling the paperwork and communication with the loan providers.
Check the details here at EazyBankLoan
Need help? Reach out at support@eazybankloan.com
A loan against property (LAP) is a secured loan where the borrower pledges their property as collateral to secure funds for various purposes.
2. Will I lose my property if I take a loan against it?
No, you retain ownership of your property. The lender only holds a lien as collateral. As long as you make timely repayments, your property remains yours.
Yes, you can use residential, commercial, and even industrial properties as collateral for a loan against property.
Yes, if the loan is used for business purposes or for renovating or repairing a house, you can claim tax deductions.
Loans against property are available to salaried employees, self-employed individuals, professionals, and business owners.
No List Founds!
Your email address will not be published. Required fields are marked *
