20 APRIL, 2022

Understanding financial products like a loan against property can seem complicated for laymen who are unfamiliar with the sector. While it can lead to confusion and doubts, it also gives rise to misconceptions and myths, thus affecting the choices. Moreover, misconceptions can deter borrowers from availing a loan property for their needs. As a borrower, while you must read all the aspects of a loan against property to avoid misinformation, you could still fall prey to baseless misconceptions.


Worry not, here are some misconceptions about loans against property that you must know about. 


  • You can only get a loan against residential properties

There is no such restriction on loans against property. You can pledge your residential, industrial or commercial property to avail the loan. The value of the loan would differ based on the type of property mortgaged. 


  • You cannot use the properties you have mortgaged

When you avail a loan against property, you pledge your property and do not sell it. The ownership of the property is not transferred to the lender until you repay the loan timely and do not commit any default. Therefore, you are free to use the property as you like. The lender can sell the property to recover their loan only when you do not return the money. 


  • You need to pay a high interest rate on loan against property

This could be the biggest misconception about loans against property. A loan against property is a secured loan and so carries lesser risk for the lender. A secured loan like this is offered at low interest rates compared to personal loans and credit cards. If you pledge a high-value property, you can get affordable interest rates. Moreover, there are many other factors like credit score, chosen lender, value and condition of the property that impact interest rates.


  • You must have a high income to get this loan

Yes, you need to earn a certain income to fulfill the eligibility of securing a loan against property. However, it is not the only criteria for your application to be approved. You need to assure the lender that you can repay the loan without default. Therefore, you must have a positive repayment history and a high credit score.


  • You have restrictions on the purpose you can use the loan for

Often, people believe that there are restrictions on the purpose you can use the loan against property for. However, it is a big misconception. Just like personal loans and other unsecured debts, there is no end-use defined these kinds of loans. You can use the amount for any purpose you like. However, you cannot use the money for illegal or speculative purposes.



A loan against property is one of the best means to fund your varied needs without liquidating your assets or digging into your savings. However, you must know that you can lose your property if you default on the repayment. Therefore, ensure to review your affordability by using a loan against property calculator before applying for the same.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.