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.
For what purposes you can use Loan Against Property funds?
Various consumers need a loan for various reasons. You can get a loan against property for any of the below mentioned reasons:
For funding business and expanding your business
To purchase new property/land by mortgaging existing property
For marriage
To fund emergency medical treatments
To fund higher studies
To fund a vacation
For home renovation or expansion
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.
Personal Loan
Personal loan is a type of unsecured loan.
A borrower can take a personal loan for personal use without any security or guarantor.
Rate of interest for personal loans is higher.
A borrower has to pay higher EMIs.
In order to get a personal loan, the borrower’s income defines the value
of sanctioned loan amount.
The repayment tenure for personal loan rages between 12-72 months
(1-6 years).
Loan Against Property
Loan against property is a type of secured loan.
A borrower has to mortgage the residential or commercial property for loan against property.
Rate of interest for loan against property is lower.
A borrower pays cheaper EMIs.
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.
The repayment tenure for loan against property goes maximum to 180 months (15 years).
