Your Guide through Personal Loan VS Loan Against Property

What Is A Personal Loan?

A personal loan refers to money that is borrowed from a financial institution, for personal (not professional or business) use. This is one of the most popular loans in India. Banks and NBFCs avail this loan very quickly to its customers. You can take this loan for any apparent reason, without disclosing it to the bank. A borrower can avail a personal loan on the basis of his or her level of income, employment history, credit score and scope for repayment.  Considering these criteria and lender, the APR (Annual Percentage Rate) of personal loan can be anywhere from 11.29% to 35%.

In every individual’s life there comes a moment where you urgently need a specific amount of money which can’t be covered by your savings. The amount can be needed for any personal reason like home or vehicle repair, to pay unexpected medical bills, for wedding, travel, credit card outstanding balance transfer etc. Here the option of getting this desired amount via personal loan comes extremely handy.

What is Loan Against Property?

‘Loan Against Property’, also known as LAPs is one of the variants of personal loan. This is a type of secured loan which comes handy in times of immediate financial needs. As per the name, the borrower can apply for loan from banks or NBFCs by giving their property as collateral. The type of property can be residential or commercial which is in current use. A borrower can keep one or more properties as collateral which belongs to him or her. Banks or NBFCs evaluate the current value of the particular property and give the loan amounting 40% – 60% of the land value. Even though your property is kept as a mortgage to the financial institution, you are allowed to live in or use the property as you desire.

What are the differences between Loan Against Property and Personal Loan?

People often confuse between loan against property and personal loans because some of their similar features. They end up considering them same. But there are many fundamental differences between loan against property and personal loans. You can analyze them in the below table and make the right decision to choose the perfect loan suitable to your budget and needs.

Category Personal Loan Loan Against Property
Type of Loan Personal loan is a type of unsecured loan. Loan against property is a type of secured loan.
Collateral A borrower can take a personal loan for personal use without any security or guarantor. A borrower has to mortgage the residential or commercial property for loan against property.
Rate of Interest Rate of interest for personal loans is higher. It ranges from 11.29% to 35%*. Rate of interest for loan against property is lower. It ranges from 8.50% – 12%*.
EMIs A borrower has to pay higher EMIs as interest rates are higher too. A borrower pays cheaper EMIs as interest rates are low.
Sanction of Loan Amount In order to get a personal loan, the borrower’s income defines the value of sanctioned loan amount. The approved loan amount for loan against property depends on the borrower’s income details as well as value of the property which is being kept as mortgage.
Repayment Tenure The repayment tenure for personal loan rages between 12-72 months (1-6 years). The repayment tenure for loan against property goes maximum to 180 months (15 years).
Disbursement In personal loan disbursement takes place as soon as within 24 hours. In LAP disbursement takes at least 48 to 72 hours.

Click here to know your eligibility to take a personal loan or LAP.

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