Debunking the Myths and Unveiling the Reality of Loan Against Property

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Debunking the Myths and Unveiling the Reality of Loan Against Property

Loan Against Property When individuals face financial challenges or need substantial funds for various purposes, obtaining a loan becomes a common choice. Among the myriad options available, a loan against property (LAP) has gained significant popularity. However, misconceptions and myths often cloud people’s perceptions of this financial product. In this article, we aim to debunk these myths and shed light on the reality of loans against property.

Myth 1: Losing Ownership of the Property:

One prevalent misconception surrounding loans against property is the fear of losing ownership of the property used as collateral. The reality is that the property serves as security for the loan, but ownership remains with the borrower throughout the loan tenure. The lender holds the property’s title deed as collateral, ensuring the loan is repaid.

In cases of default, the lender may have the right to take legal action to recover the outstanding amount, but this is a last resort.

Myth 2: Limited Usage of Funds:

Another myth associated with loans against property is the belief that the borrowed amount can only be used for specific purposes. However, the reality is that the funds acquired through a LAP can be used for a wide range of purposes. Whether it’s financing a business venture, consolidating debts, funding education or medical expenses, or even investing in another property, the borrower has the flexibility to utilize the funds as per their requirements.

Myth 3: Lengthy and Complicated Approval Process:

Some individuals are deterred from applying for a loan against property due to the perceived lengthy and complicated approval process. While it is true that the evaluation process for LAP involves assessing the property’s value and the borrower’s creditworthiness, advancements in technology have streamlined the application and approval procedures. Many financial institutions now offer online application facilities and expedited processing, significantly reducing the turnaround time.

Myth 4: High Interest Rates:

There is a common misconception that a loan against property carries exorbitant interest rates due to the higher risk associated with the loan. However, the reality is that the interest rates for LAP are typically lower than those for unsecured loans, such as personal loans or credit cards. The interest rates are determined based on factors like the loan amount, tenure, borrower’s credit profile, and the property’s market value. A good credit score and a well-maintained property can often lead to competitive interest rates.

Myth 5: Inability to Borrow Against Under-Construction Property:

Many people believe that loans against property are only available for fully constructed properties and not for under-construction ones. In reality, several lenders offer loans against under-construction properties, subject to certain conditions. The borrower may need to provide additional documents, such as the builder-buyer agreement, to support the loan application. It’s essential to clarify this aspect with the lender to ensure eligibility and a smooth borrowing process.


A loan against property is a versatile financial product that can offer significant advantages for individuals in need of substantial funds. By debunking the myths surrounding LAP and highlighting the reality, we hope to empower borrowers with accurate information. It is essential to thoroughly research and understand the terms and conditions, interest rates, and repayment plans offered by various lenders before opting for a loan against property. Making informed decisions will enable borrowers to leverage their property’s value and meet their financial goals effectively.


Shalesh Tiwari ! MD in sk digital media pvt ltd and guest blogger

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