If you’re a business owner looking to secure funds, you’ve probably come across multiple financing options: business loans, personal loans, and credit cards. While business loans are the obvious choice, a Loan Against Property (LAP) can sometimes be a better fit.
In this blog, we’ll explain what a Loan Against Property is, compare it with an education loan, and show you why it might be worth considering.
Loan Against Property vs. Business Loan
| Aspect | Loan Against Property | Business Loan Loan |
|---|---|---|
| Collateral Requirement | Requires collateral, typically immovable property like a house or land. | Often unsecured (no collateral required) or partly secured, depending on the lender’s requirement. |
| Loan Amount | Depends on the property’s market value; lenders may offer up to 75% of the property’s value. | May be smaller, often based on creditworthiness and business financials. |
| Eligibility Factors | Property ownership, clear title, and adequate property value are crucial. | Strong business financials, good credit score, existing cash flow/profitability. |
| Interest Rates | Generally lower due to the secured nature of the loan; rates may start around 9.25% p.a. | Typically higher than LAP; rates can range from 11% to 22% p.a. |
| Repayment Tenure | Longer tenures, often up to 15-20 years, resulting in lower EMIs. | Shorter terms, typically 1–5 years (can extend slightly if partially secured). |
| Usage | Fewer usage restrictions; can be used for various business needs. | Varies; some business loans may be restricted to specific purposes (e.g., working capital, equipment). |
| Who Benefits Most | Established property owners needing larger funds and longer repayment options. | Businesses needing quick capital without collateral, or smaller amounts for shorter durations. |
Read More: How to Apply for LAP without Income Proof?
Why Might a Loan Against Property Be Better?
1. Lower Interest Rates
One of the biggest benefits of taking a loan against property is that it typically comes with lower interest rates compared to an unsecured business loan. The reason? When you pledge a property as collateral, you give the lender a security blanket.
If, for some reason, you can’t repay the loan, they have the right to sell the property to recover the outstanding amount. This lowers the lender’s risk, which often translates into lower interest rates for you.
2. Higher Loan Amounts
The amount you can borrow against your property can be substantially higher than what you might qualify for with an unsecured business loan. Business loans often have strict limits determined by your credit history, business financials, and anticipated revenues.
In contrast, a loan against property considers the value of the property, which can be quite significant. This makes an LAP a solid choice if you need a large sum of money for a major business expansion or large capital investment.
3. Longer Repayment Period
A longer tenure can often mean more manageable monthly payments. Loans against property can sometimes be repaid over 10 to 15 years (and in some cases, even longer). A standard business loan may only offer terms of 1 to 5 years.
By stretching out the payments, you can keep more cash on hand each month to reinvest in your business.
4. Flexibility of End-Use
Unlike some business loans that come with very specific usage conditions (e.g., a working capital loan may need to be used for day-to-day operations), a loan against property often has fewer restrictions.
You’re free to use the funds for various business-related needs—whether it’s purchasing inventory, upgrading equipment, hiring more staff, or even consolidating other debts.
5. Easier Approval for Established Property Owners
If you own property and have been paying your dues on time (e.g., existing loans, taxes, etc.), your chances of approval for a loan against property are generally strong.
Having a tangible asset on the table as collateral reassures lenders that you’re a responsible borrower.
Read More: Loan Against Property Eligibility Criteria
Compare Loan Against Property Interest Rates – 2025
| Banks/ NBFCs | Rate of Interest | Maximum Loan Amount |
|---|---|---|
| SBI | 10.60% p.a. – 11.30% p.a. | Rs. 7.5 Crore |
| HDFC | 9.50% p.a. – 11.00% p.a. | 65% of the market value of the property |
| IDFC | 9.25% p.a. onwards | 50% – 70% of the market value of the property |
| Tata Capital | 14.25% p.a. onwards | Depending on the market value of the property |
| Axis Bank | 10.50% p.a. – 10.90% p.a. | Rs. 5 Crore |
| Kotak Mahindra Bank | 9.50% p.a. onwards | Rs. 5 Crore |
| Bank of India | 10.10% p.a. Per lakh | Rs. 5 Crore |
| LIC Housing Finance | 9.70% p.a. – 11.55% p.a. | Rs. 2 lakhs onwards |
| PNB Housing Finance | 9.24% p.a. – 12.75% p.a. | 70% of the market value of the property |
| ICICI Bank | 10.85% p.a. – 12.50% p.a. | 75% of the market value of the property |
How Can Credit Dharma Help?
Business expansion requires timely funding. The right financing choice can significantly impact both short-term operations and long-term success. At Credit Dharma, we make this possible by offering lowest guaranteed Loan Against Property interest rates that keep your monthly payments manageable, allowing you to enjoy more of what truly matters.
But that is not it. We offer:
- Guaranteed up to 100% funding
- Receive lifetime assistance and expert guidance long after your loan is approved.
- Enjoy a fully digital process with minimal paperwork
- Get your loan approved within just 1-2 weeks.
Frequently Asked Questions
A Loan Against Property is not strictly a business loan. It’s a secured loan using residential or commercial property as collateral. While LAP funds can be used for business purposes, they are also applicable for other needs like education or medical expenses. In contrast, a business loan is specifically for business-related uses and may require collateral.
A term loan involves borrowing a lump sum and repaying it with interest over a set period. Most business loans are term loans, but not all. Business loans can also be credit lines or overdraft facilities, which don’t follow a fixed term. Therefore, a term loan is a type of business loan, not synonymous with all business loans.
The loan amount depends on the lender’s valuation of your property. Lenders typically offer 50% to 70% of the property’s appraised value. Exact amounts vary by bank, your repayment capacity, and credit history. Borrow only what you need and can repay comfortably.
The best loan for your startup depends on the funding needed, your financial situation, and risk tolerance. If you have valuable property and want lower interest rates over a longer period, a Loan Against Property is a good option. If you don’t want to risk your property or need a small amount quickly, an unsecured business loan may be better.
Interest rates vary based on credit score, lender policies, and market conditions, but LAPs are often the cheapest because they’re backed by collateral, posing lower risk for lenders. Personal loans and unsecured business loans have higher rates due to no asset pledged.
HDFC Home Loan
SBI Home Loan
