Common Loan Against Property Myths Busted

Loans against property are a common option for people needing high-value cash. Given that its interest rates are almost 3% to 4% more than that of a loan against property, it is a more affordable alternative to a personal loan, which has a cap on the sanctioned amount and is often more expensive. Borrowers of property loans are free to use the loan proceeds however they see fit, whether for business growth, overseas schooling, wedding expenses, urgent medical expenses, or even a once-in-a-lifetime trip. However, there are various misconceptions about loans against property, a secured form of financing that can provide you with significant amounts for a variety of demands (LAP).


You risk not using it to its maximum potential and making a snap judgment by giving in to them. This site seeks to expose these fallacies and clarify them so that you may make informed decisions. Let’s start.

You can not use/live in the property you have pledged

This is a typical misunderstanding that discourages potential applicants from making use of a loan against the property’s advantages. Even when the lender uses your property as collateral, you are still within your rights to utilize it however you see fit, including by allowing renters to inhabit it or living there yourself.

Your privileges can only be terminated in the event that you repeatedly miss EMI payments or fall behind on your repayment schedule. The loan agreement gives the lender the right to seize your property in order to recover the debt.

There is a restriction on the usage of funds

Your loan against property sanction has no end-use restrictions, much like a property loan or a gold loan, making it an attractive funding alternative. Home and auto loans have a predetermined purpose, and the money issued can only be used to pay for the costs associated with purchasing a home or a vehicle. To cover expenses outside of this range, people tend to turn to personal loans. Anyway, because a loan against property has more cost-sensitive and inexpensive interest rates than a personal loan, you are free to use the money however you see fit.

You can pledge only a residential property

You can use commercial property in addition to residential property as collateral for loans. In other words, loans against property are not just available for homes. Thus, you can pledge to receive cash if you own a factory, an office in a business building, or even a warehouse.

Regardless of the asset, you are promising, ensure the documentation is accurate and up to date. This is due to the fact that paperwork is crucial, and the lack of any crucial item could result in your application being refused.

A loan against property has a higher interest rate

The interest rate is lower because the loan is secured by collateral. The interest rate also depends on the creditworthiness and ability to repay the borrower.

A high score combined with strong repayment ability makes it easier to get a loan at a reasonable interest rate. It is wise to examine loan against property interest rates before moving forward with the transaction.

You need to be in the high-income bracket to avail the loan

Although income is a factor in loan eligibility, you may still be eligible for this loan even if your income is moderate.

Make sure to prove to your lender that you have a repayment strategy in place and that you will adhere to it. Keep your debts to a minimum and make sure you pay all of your EMIs on time during the loan’s term.

To conclude

A loan against property can help you meet various needs with a competitive rate of interest. It helps you make money out of your possessions. However, before you sign, make sure you completely understand the terms, take processing and other fees into account, and read the fine print.

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