What Is a Loan Against Property and How Is It Different from a Home Loan?

A Loan against Property (LAP), popularly known as LAP, is a secured loan facility where funds are borrowed by offering an existing asset, such as residential, commercial, or industrial property, to the lending institute. This facility allows borrowing a significant loan with lower interest rates than unsecured loans and a more extended repayment period.

The primary purpose of a LAP is to provide liquidity without requiring the sale of the asset, thereby allowing the borrower to meet various financial needs such as business expansion, education, or personal emergencies while retaining ownership of the property. On the other hand, a traditional home loan is designed to acquire residential property.

In a home loan agreement, the property purchased is considered collateral to the transaction. The main difference is that LAP utilises an existing property as collateral to borrow, while a home loan is used to purchase a new property.