A loan against property (LAP) is one of the most common financial solutions that allows individuals to borrow money by using their property as collateral. This loan type is ideal for those looking for larger sums of money, whether for business expansion, personal needs, or emergencies. One of the key aspects of this loan is the loan against property interest rate, which determines the cost of borrowing. Understanding what affects this interest rate can help borrowers make more informed decisions.

1. Type of Property One of the most significant factors that influence the loan against property interest rate is the type of property you offer as collateral. Banks or non-banking financial companies (NBFCs) tend to offer lower rates on residential properties compared to commercial properties. Residential properties are perceived as less risky because their value generally appreciates steadily over time. On the other hand, commercial properties might be viewed as more volatile, leading to slightly higher rates.