Top 8 Misconceptions about Loan against Property


Fincrif India

Sep 30

04:52 AM

You can utilize it for a range of individual or professional goals, and it offers you financial support. Still, there are still a few misconceptions about mortgage loans.

A loan against property is thought of as the most secure choice when it comes to a large-scale investment or long-term finance. You can utilize it for a range of individual or professional goals, and it offers you financial support. Still, there are still a few misconceptions about mortgage loans.

Required High Income

Have you abandoned the idea of taking out a loan against your property because a close friend told you that you required a large salary to be eligible for this kind of financing? If so, you should immediately alter your choice.  For a mortgage loan, you must provide the legal records for your pricey property or structure, and the lender will hold onto the records until the debt is repaid. The lender's risk is significantly reduced because you mortgage a valuable asset with them. As a result, you don't need to have a significant income to be eligible for a loan against property. 

Your Mortgaged Property Is Not Usable

 Are you reluctant to apply for a loan against the property because you've heard that once the money is given, the bank won't allow you to utilize the asset until the loan is paid back? If so, immediately banish this thought. When you take out a loan against your property, the bank merely receives your property documents; they don't live in the home or building that is subject to a mortgage. It implies that there are no limitations placed by the banking institution on how you may use your property. The financial institution, however, has the full right to sell your home at auction to recoup any unpaid debts if you fail to make payments on your loan.

Lender Examines Purchase Price

 How would you feel if you had paid Rs. 60,000 for some land in 1980 and received a loan against property from a financial institution in 2021 based on the LTV determined on that amount? Frustration will set in. However, the basis for this scenario is a rumour that was spread by uninformed individuals. The current market value of the property is really used by financial institutions to calculate LTV. A loan-to-value (LTV) range of 40 to 75% is offered for mortgage loans in India. The financial institution determines the size of your loan based on a number of factors, including the value of your property, your income, your credit history, and a few more. 

Residential Property Is the Only Type of Property a Loan Against is Available Against

Many individuals mistakenly think that only residential real estate or buildings qualify for loan security. However, when you consider the skyrocketing cost of business spaces, whose lender will decline to grant a loan secured by commercial real estate? The rate of interest charged by many lenders on LAP secured by commercial real estate is actually lower than the rate charged against residential property. Therefore, put your worries aside and submit your application for an LAP right now if you own a store or any type of office space but are scared to do so. 

The lender charges a high interest rate

Have you ever questioned a financial institution representative as to why some borrowers are assessed a greater interest rate than others and why everyone is not subjected to the same rate? The level of risk associated with lending to various borrowers provides the solution. The risk associated with lending is ultimately reduced in the case of a mortgage loan because you are putting your valuable property on the line. LAP interest rates are significantly cheaper than those of other types of financing because of this. Therefore, anyone spreading the misconception that a loan against property is only available with a high interest rate needs to first do their research.

There is a Quick Loan Against Property Available

 Do you plan to submit many loan applications at various times just because you heard a loan against property might be taken out for a brief time period? If so, think again about your choice and bear in mind that LAP is only offered for a maximum of 15 years. You'll see that the LAP product has the longest repayment duration when you contrast home loans with gold loans, personal loans, and business loans.

Rare Approval of Loan Against Property

Many people have the impression that the approval process for mortgage loans is very stringent. That's not the case, though. A few days pass before the lender approves your loan against the property because the property must first undergo legal verification and evaluation.

Your account receives the money quickly after they have successfully verified your documentation.

 Low Loan Amounts on the LAP

 When a loan is secured by real estate, the asset put up as security is valuable in the market. The amount of the loan is determined by the item's current market worth. In light of this, anyone who asserts that LAP exclusively offers small loans is just spreading false information.


When you require a sizable volume of money with a long repayment time and low interest rate, a loan against property is a perfect choice. Just make sure you are prepared before applying by having all the property documentation on hand. Before approaching a lender, you should also conduct web research and comparisons of several. 

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