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Debunking 6 Common Misconceptions about Loan Against Property

By IIFL Home Loans | Published On Jun 02 2023 7:21 AM 1 min read 59 views 1206 Likes


Imagine this, you own an amazing property, be it a cosy home or a busy commercial space. Now, picture unlocking its hidden potential and transforming it into a financial resource that can fuel your dreams. Sounds interesting, doesn't it? Enter the world of Loan Against Property (LAP), where your property becomes the key to unlocking a world of possibilities.

But hold on! As you move onto the Loan Against Property procedure, beware of the hidden myths that could cloud your judgment. In this blog, we debunk 6 common myths that have often deterred individuals from exploring the true potential of Loan Against Property.

6 Loan Against Property Myths Busted:


MYTH 1: You can only use residential property to pledge for LAP:

A LAP is not limited to a specific property type. Whether it's a business or residential property, you can leverage its value to access the funds you need. What's more? You have the flexibility to utilise the loan amount to reduce lease rent and purchase the property.  

MYTH 2: Using your collateral against a loan is not a safe option:

LAP is a secured loan backed by your pledged asset, offering greater stability. It can be a safer option compared to other loans like gold or business loans. As long as you have a steady income, a good credit score, and the documents needed for loan against property, LAP can be a sound choice. Plus, it provides substantial funds based on the value of your pledged property. Embrace the security and financial opportunities that a LAP brings to the table.  

MYTH 3: You can use these funds only for restricted end purposes:

Embrace financial freedom. With a loan against property, you have the power to decide how to utilise the funds. Whether it's fulfilling personal dreams or fueling business ambitions, the choice is yours. Upgrade, invest, or support your loved ones—there are no limitations. A flexible loan against property repayment schedule expands the scope of your freedom further. Just remember to tread wisely and make the most of this incredible opportunity.

MYTH 4: You'll face high-interest rates on your LAP:

Ditch the notion that a loan against property means sky-high interest rates. Don't let assumptions hold you back. The truth is, interest rates on loans against property are affected by multiple factors such as loan amount, tenure, property type, and valuation. Different lenders offer varying rates, and guess what? You have the power to negotiate based on your credit score and property valuation. Just pay attention to the terms and conditions on your loan against property to know the details. Take control, explore your options, and discover the possibilities that await you with a loan against property.  

MYTH 5: Your income bracket determines your eligibility for a LAP:

Don't let your income limit your aspirations! Contrary to popular belief, you don't need a sky-high salary to qualify for a loan against property (LAP). Whether you're a salaried professional or a self-employed individual, LAP is within your reach. Your eligibility depends on factors beyond income, such as your credit history (be it minimal or non-existent), low liabilities, and the high value of your property. Plus, if you've built a longstanding relationship with your lender and shown good credit behaviour, it positively impacts your chances of securing the loan.

MYTH 6: You can borrow to the full value of the property:

No, this isn’t the case. While you may have all the necessary documents in place for a LAP loan, it doesn't automatically translate to receiving the full market value as the loan amount. Lenders typically offer loans ranging from 70% to 90% of the pledged property's resale value. Understanding this loan-to-value ratio is key; according to the value and the policies of the lender. A borrower must consider these aspects during the Loan Against Property procedure.



Your property holds incredible value, and loan against property provides a gateway to unlock its hidden potential. Don't limit yourself to residential property alone; both residential and commercial properties can be pledged. Bust the myth that LAP is unsafe. Take the first step towards realising your dreams with IIFL Home Loans. Enjoy the convenience of 30-minute loan* approval and flexible loan tenure of up to 7 years. Make the most of attractive interest rates and seize the financial opportunities that await you. Apply now with IIFL Home Loans.


  1. 1. Is it true that LAP can only be taken for short durations?

Not at all! The notion that LAP is restricted to short loan durations is a misbelief. The duration of the loan depends on the specific terms, conditions, and policies of the lender.

  1. 2. Is it expensive to pre-pay a loan against property?

Contrary to the myth, pre-paying a loan against property is not as costly as you may think. While there may be pre-payment charges associated with such loans, these charges tend to decrease over time. Some banks may impose a pre-closure fee, while others may not. It is essential to explore the terms and conditions of your specific loan agreement to determine the pre-payment charges involved.

  1. 3. Is it risky to take a loan against property?

If you meet the eligibility criteria for LAP, there's no need to worry. As long as you make timely repayments, your property will remain secure, and you will regain possession of the property papers upon loan repayment

  1. 4. Is there a specific purpose for which a loan against property can be used?

A loan against property provides you with the freedom to utilise the accumulated value of your residential or commercial property for a wide range of personal and business needs. The funds obtained through LAP can be directed towards various purposes based on your requirements and aspirations


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