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Loan Against Property Vs. Personal Loan

Arrangement of the funds could be a necessity for anybody, be it a business owner’s requirement for financing his business needs, or one’s requirement for renovating a home. In such situations, what comes to aid is a loan or the credit borrowing option. Amongst all loan options, Personal loans and Loans against property are two common credit facilities availed by people. However, what confuses people is choosing the one amongst the two, as in which one is better in times of crisis. For this, one needs to make a comparison between both these credit facilities, that is listed in the table below: 

Comparison between a Personal Loan and a Loan against property

ParameterPersonal LoanLoan against property
DefinitionA personal loan is a credit borrowing facility that allows the loan borrower to avail a loan without keeping anything at stake. Loan against property is a credit borrowing facility that allows the loan borrower to borrow the loan by keeping the property as a mortgage.
Interest ratesThe interest rates on a personal loan are high in nature as they do not involve any security. The interest range on the personal loan begins from 10.50%.Loan against property allows borrowers to borrow funds at lower interest rates as they involve collateral. The LAP interest rates begin from 8.70%
EMIsSince the interest rates charged on the personal loan is high, thus borrowers are accustomed to high EMIs.Loan against property involves lower interest rates. The EMIs for LAP is comparatively lower than personal loans. 
Processing feeThe processing fee charge don personal loan is up to 2% of the loan amount.The processing fee on Loan against property is up to 1 % of the loan amount.
Loan amountPersonal loan borrowers can avail loans up to Rs 75 lakhsThe loan amount as per the Loan against property can be availed according to the LTV or the loan to value ratio of the property. The amount, however, can range up to Rs 5 crores.
Loan tenurePersonal loans can be availed for a maximum tenure of five years.Loan against property, on the other hand, can be availed for a maximum tenure of 15 years.

Thus, on a concluding note, it must be understood that both personal loans and loan against property have their own pros and cons attached to them. While loan against property is ideal for borrowers who have a property under their name, and who seek to avail a comparatively larger loan mount for larger tenure. Personal loans, on the other hand, are better if one wishes to avail a loan for a short time span of five years and for an amount up to Rs 75 lakhs. Also, personal loans are better to a borrower who either do not hold an asset under their name or do not wish to keep it as a collateral. Personal loans have an ‘end-use of loan’ feature attached to them; thus, the reason for availing the loan need not be disclosed to the lender. While loan against property, on the other hand, can be availed for a similar purpose like marriage, education, business expansion, yet the reason for availing a loan against property need to be disclosed to the lender, unlike in the case of a personal loan.

Summary:

Loan against property and personal loans are two common forms of credit facilities that are availed by people. However, people often tend to compare the features of these two, before going for any one of these. Thereby to provide a clear choice to the loan borrowers, a comparison is drawn between the two in the table listed below:

Loan against property Personal loan
LAP is a credit facility that allows the borrower to borrow the loan against the property as a mortgage.A personal loan is a credit facility through which the loan borrower can avail a loan without collateral.
The LAP interest rates begin from 8.70% and are comparatively lower than a personal loan.The interest range on the personal loan starts from 10.50% and are comparatively higher than LAP.
The EMIs for Loan against Property is comparatively lower than that of a personal loan. The borrowers are obliged to high EMIs in case of personal loans.
The loan amount according to the Loan against property can be availed as per the LTV ratio. The amount can range up to Rs 5 crores.Personal loan borrowers can avail loans up to an amount of Rs 75 lakhs.
Loan against property can be availed for a tenure of maximum fifteen years.The maximum tenure for personal loans is five years.

Thus, a borrower should access his or her needs before choosing the best for him, which is a subjective term that varies across the loan borrowers.

News Reporter

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