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Loans against property (LAP) is one of the common avenues to arrange a big amount within a short time span. Since it is a secured loan it is usually available at interest rates lower than personal loans. Most banks and even non-banking financial companies (NBFCs) offer these loans for tenures of up to 20 years. Documentation and approval process for a LAP is relatively easy and speedy. Banks generally approve a loan within 7 to 10 working days.

Loan amount and LTV

The loan amount can vary from Rs 5 lakh to Rs 500 crore. The loan to value (LTV) ratio is normally restricted to 50-60% of the property’s market value. One should check the property’s price before applying for a loan.

Interest rates

Among banks, HDFC Bank offers the lowest interest rate of 8.00% on loan against property. Bank of Baroda is offering the second cheapest interest rate on LAP which is 8.20% per annum.

IDBI Bank and Bank of Maharashtra are currently offering loan against property at an interest rate of 8.25% and 8.55% respectively. There are 8.70% interest rates on LAP offered by PNB and Karur Vysya Bank.

The State Bank of India, country’s largest lender, offers 8.80% interest on LAP. On the other hand, both ICICI Bank and Bank of India charge 8.85% interest on loan against property.

HDFC Bank: 8.00%

Bank of Baroda: 8.20%

IDBI Bank: 8.25%

Bank of Maharashtra: 8.55%

Punjab National Bank: 8.70%

Karur Vysya Bank: 8.70%

State Bank of India: 8.80%

ICICI Bank: 8.85%

Bank of India: 8.85%

(as on August 31, 2021)

Tax

Loans against property do not provide any tax benefit, unlike home loans that provide tax benefit. So, your tax liabilities remain the same even after taking the loan. So, you should plan your financials accordingly.