A loan against property provides a considerable amount of funds to the borrower. The reasons for this type of loan are generally setting up a new business, marriage purpose, or education if pursued by children abroad. It is important that you know all the myths and the exact realities of the loan against the property before you decide to take one.

Misinformation is something that one should be aware of before taking any type of loan from lenders. Ensure that the decision you take is based on facts and actual data and not myths that are being spread in the market.

Some of the common myths that are related to Loan Against Property are given below

Myth: A higher interest loan is better than Loan Against Property

With a good credit history, there is no doubt that the credit market has loans that are better than loans against property. But, a loan against property is a loan that will give you access to high-value funds and the rate of interest is also comparatively low. It is a type of loan that requires your property to be held as collateral.

You should never have to worry about keeping your house as collateral if you are certain that the repayment will be done on time. It needs planning to keep your property as the collateral. So, if you plan properly, then a loan against the property is actually a very good financial tool and it helps to maintain financial stability.

Myth: The property pledged cannot be used.

There is a misconception among people that the property once pledged cannot be used till the tenure of the loan. This information is completely false and one can absolutely use the property even while the whole tenure of the loan is not complete. The property will come into the ownership of the lender if the borrower defaults on payment of the loan. In case of any default, the lender has the right to sell the property and raise funds from it.

Myth: The full value of the property can be taken as a loan

This is again one misconception. The full value of the property will never be given to you as a loan. Generally, the value of the loan ranges from 75% to 90% of the property’s value. Though the policy of each lender and the terms and conditions differ, this is a general figure. So, you should always first estimate the value of your property and then apply for a loan as per your requirements.

Myth: A loan can be taken against a residential property only

This is absolutely not the case in the market. The loan can be taken against a residential as well as a commercial property. The loan amount can also be used to buy commercial or residential property or to discount the lease rent. At CreditMantri we have a large number of options from banks and NBFCs that are available to give loans against property to the borrowers.

Also Read: Does CIBIL™ Score Affect Loan Against Property?

Myth: There are restrictions on the usage of the sanctioned amount

Just like any other loan like a personal loan or a gold loan that is available from the market, there are no restrictions that are put for the end use of the loan taken against the property. The option of using a loan against property supersedes personal loans because the cost of personal loans is much higher than the cost of a loan against property. Since the sanctioned amount does not have any restriction on its usage therefore it becomes easy to use the loan that is availed against the pledged property.

Myth: Your income should be higher to avail of this loan

Sometimes, the income of the borrower affects the loan applications. It depicts the ability of the borrower to repay the loan amount within the specified time period. But, with loans against property, this is not the case. You can easily avail of the loan by pledging your property as collateral and if your lender is satisfied that you will be able to repay the loan within a specified period of time, then the loan will be sanctioned.

Myth: The rate of interest is high

For personal loans, the rate of interest is higher than loans against property. For the latter option, the rate of interest depends upon various factors such as the lender you choose, the condition of the property and also your credit score. Generally. Loans against property are secured so they are cheaper loans than personal loans. The tenure for repayment of these loans is also longer compared to the personal loans available in the market.


If you are looking for a loan in the market without any restrictions and you can pledge a property then, loans against property are a good option to choose. The loan can be tailored to suit your financial requirements and repayment capacity.

FAQS of Loan Against Property. What are the Myths and Realities

1:Is a loan against property a good idea?

If you have a fully constructed commercial or residential property, without any encumbrances then loans against the property are probably the best idea to avail of a loan. The loans have a low- rate and can be obtained easily.

2:Can a loan be taken against a plot of land?

These days a number of lenders offer loans securing a plot of land as collateral. This type of loan can be used to construct a building or any residential house.

3: What is the interest rate for a loan against property?

Generally, the interest rate for loans against property ranges from 8% - 10%.