Everyone needs money in order to fulfill their desire or dreams but not everyone afford it. In order to achieve their dreams money becomes the important key factor. A person can take a Home Loan to purchase a house or flat or to construct a house. However, Loan Against Property helps you to fulfill your personal as well as business needs. This article is about the Home Loan Vs Loan Against Property. Both the loans have their pros and cons, so let’s see the difference between a Home Loan and a Loan Against Property.
What is a Home Loan ?
A Home Loan is a type of loan in which a borrower borrows money from a bank or any money lender company in order to buy a house or flat, or for construction of a house or renovation of an existing house. First of all, Home Loan is also called a Housing Loan and this loan is a Secured Loan. Basically in a Secured Loan you have to submit a collateral for a security purpose.
What are the different purposes to take a Home Loan :
Many different purposes are there to take a Home Loan. These are :
- buy a house/flat
- renovate an existing house
- construct a house
- Buy a property
Eligibility Criteria for a Home Loan :
There are some eligibility criteria you should know before availing for a Home Loan :
- Age : For any type of employee : 21 to 65 years.
- Monthly income of a borrower must be a minimum of 25,000.
- An applicant should have a work experience of 2 years.
- The credit Score must be good (from 750 to 900).
- It is a Secured loan, so the borrower should have to submit a collateral for security purposes.
Documents Required
Who can take a Home Loan :
A home Loan can be taken by a Salaried individual, Self-employed individual, some company and professionals.
What is Loan Against Property ?
Simply, a Loan Against Property is a type of loan in which a borrower borrows money against a property. The property type can be Industrial (Factory, warehouse), Residential(Flats, Home) or Commercial(Buildings, Shops, Malls).
What are the different purposes to take a Loan Against Property :
Many different purposes are there to take a Home Loan. These are :
- You can use this loan to fulfill your personal as well as business requirements
- Expansion of your business
- Family marriage
- For a vacation
- Medical treatment
- Higher study
Eligibility Criteria for a Loan Against Property :
There are some eligibility criteria you should know before availing for a Home Loan :
- Age : For any type of employee : 25 to 65 years.
- Residing in India.
- An applicant should have a work experience of 3 years.
- The credit Score must be good (from 750 to 900).
- Loan will be given against a property.
- Monthly income of a borrower must be a minimum of 25,000.
Documents Required
Who can take a Loan Against Property :
A loan against property can be availed by a Salaried individual, Self-employed individual.
Home Loan VS Loan Against Property :
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Interest Rate :
Interest rate is the main and most important key of a loan. Home loan interest rate is usually much lower than a loan against property. Interest rate of a loan against property is a bit higher than a home loan.
The interest rate of Home Loan starts from 6.6% and can go up to 11.15% but the interest rate of loan against property starts from 9.5% and can go till 11.70%.
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Loan-To-Value(LTV) :
You can get a maximum 60% loan amount against the property value in loan against property but in home loan you can get up to 90% of the property value. Before approving the loan, banks visit the property site.
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Loan Tenure :
In Home Loan, the loan tenure is longer than the Loan Against Property. You can repay the loan over the period of 30 years while in loan against property you get a maximum period of 15 years.
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Processing Fee :
In loan against property the processing fee is up to 1% of loan amount (including applicable taxes) whereas in home loan the processing fee is up to 0.5% of total loan amount (including applicable taxes).
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Tax Exemption :
In case of Loan against property the tax exemption is nil but there is a tax benefits for home loan under section 24 and 80c.
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Loan Processing :
In the time of processing a loan, home loans get easily processed because of less documentation (within 15 days) but in case of loan against property the time required is much higher than a home loan because there is much more paperwork and also banks check the property details of an applicant thoroughly.
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Equated Monthly Income (EMI) :
Higher the interest rate, higher will be the EMI of a loan. So eventually we can say that the EMI of a home loan is much lower than a loan against property.
Home Loan VS Loan Against Property :
| Type | Home Loan | Loan Against Property |
| 1. Interest Rate | 6.6 onwards. | 9.5 onwards. |
| 2. Loan Amount | Up to 90% of the property value. | Up to 60% of the property value. |
| 3. Loan Tenure | Maximum of 30 years. | Maximum of 15 years. |
| 4. Processing Fee | Up to 0.5 of total loan amount + applicable taxes. | Up to 1% of total loan amount + applicable taxes. |
| 5. Tax Exemption | Exemption under section 24 & 80c. | No tax exemption. |
| 6. Loan Processing | Easily processed within 15 days. | Take time to get through the process. |
| 7. EMI | Lower than a LAP. | Higher as compared to home loan. |
| 8. Purpose/span> | To buy a house, flat or under construction property. | For personal as well as business use. |
Which loan should be better ?
According to interest rate, loan tenure and EMI, Home Loan will be better if someone interested to take a loan for his/her house.