PERSONAL LOAN V/S LOAN AGAINST PROPERTY

PERSONAL LOAN V/S LOAN AGAINST PROPERTY

A fast-growing economy, growing expenses, and foreverlimited budget forces us millennials to take personal loans from the banks forlimited period so that we can make those big expenses once in a while when itbecomes of absolute necessity. It could be a marriage in the house or expansionof your small business, raw materials for business, heavy machinery etc.Personal loans have become a trend for the middle-class as it seems morefeasible than other orthodox methods.

In the recent times the demand for loan against property hasseen a noticeable rise, people are now mortgaging their property to avail aloan for a longer term. Now the question that confuses the common man is whichtype of loan is more profitable and secure? Is personal loan better than LAP?LAP more unsecure?

How LAP more successful in the longer run? We took mattersinto our hands in pursuit of finding these answers. We did the comparison onbasis of the factors that will have an impact on your choice.

First, let’s discuss what exactly differentiates the two:

PERSONAL LOAN:

Personal loan is an unsecured loan which can be availed fromthe bank for personal use. You generally use the loan amount for personalexpenses like, construction of your house, raw materials, machinery, marriage,a business set-up etc.

LOAN AGAINST PROPERTY (LAP)

Loan against property is a secured loan that can be availedagainst mortgage of the borrower’s property. It can be a residential propertywhich is either self-occupied or rented, commercial property or a piece ofland. You can use this loan amount to meet any personal expenses just like apersonal loan.

Now let’s discuss some pointers to know which one is better:

PROCESSING TIME

Personal loan is a better option for those people who arelooking for a quick disbursal as banks will demand your monthly income, checkyour credit score and ask for basic documents for identity proof and willapprove the loan within 7 days to a fortnight, sometimes less than that.

Loan against property is a good option for those who do nothave a time constraint but want a large amount for a longer term. It requiresthe borrower to mortgage his/her property against the loan which may take alonger time as the borrower has to prove the ownership of the property and itsmarket value. The borrower will also have to submit income and identity proof.This procedure may a take a fortnight to one month.

INTEREST RATES

Another major factor is the interest rate levied on the bothtypes. Personal loan is an unsecured type of loan due to which the interestrate is usually much higher than LAP. This is an option for those people whohave a deadline and want a quick disbursal.

Loan against property, on the other hand is a secured loanagainst mortgaged property so banks cut you some slack by lowering the interestrates, much lower than personal loans. This is an option for those people whodo not want to bear a high interest rate on their shoulders.

LOAN TENURE

Loan tenure is also a major difference between the two,Personal loan tenures may go up to 5 years, while in case Loan againstproperty, the tenure can go up to 15 years. People who do not want to extendtheir EMIs for too long will opt for personal loans and the people who want abigger loan amount for a longer tenure will obviously opt for LAP.

LOAN AMOUNT

Personal loans are taken for a shorter time period;therefore, the loan amount is usually lower than LAP, most banks and financialinstitutions provide a cap of 15-20 lakhs in case of personal loans while Loanagainst property can go up to 2-3 crores which is a major difference.

EMIs

EMIs in both cases will have significant difference. In caseof personal loan, the interest rate is high, and the duration is short due towhich the EMIs are automatically high while loan against property usually havea longer tenure so the EMIs are lower.

Both personal loan and loan against property have their ownpros and cons of their own, it depends on the need and preference of theborrower. We cannot choose one out of the two because it is case sensitive. Wehope we made it easier for you to understand the basic differences of the twotypes. If you want to check out some personal loans and loan against propertyplans, click here. Keep coming back to us for more such interesting content andtell us what else you would want us to write about. Get to know some tips tonail personal loan approval.

Till then….happy buying!

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