Necessity of money in our life is very important. So whenever we have a crisis of money then we go for a bank and bank suggests us to take loan. There are so many different types of loans are available but the popular loans are the Personal Loan vs Loan Against Property.
Sometimes people get confused between these two loans that what would he/she will avail to get the maximum benefits. So let’s see what is the main difference between Personal Loan And Loan Against Property.
What is Personal Loan :
Eventually Personal Loans are the type of loan in which one can cover his/her personal expenses. In Personal Loan you can borrow money to use for a variety of purposes. It is a type of unsecured loan(the borrower does not have to pledge any security to obtain the loan.
Purpose to take Personal Loan :
Emergency expenses
Buying electronic gadgets
Wedding expenses
Vacation costs
Home renovation
Paying credit card bills
Eligibility Criteria :
Eligibility criteria will vary from bank to bank. But the common factors are:
1.His/her age
2.Income of individual
3.Employees of private limited companies, public sector
undertakings, including central, state and local bodies.
What is Loan Against Property :
As the name implies, a Loan Against Property is a loan given against property. The property can be either Industrial(Factorise, Warehouse), Commecial(Shops, Malls, Buildings) or Residential(Flats, Home).
Purpose to take LAP :
Loan Against Property can be taken for the following purposes:
1. To expand your business
2. For higher studies in abroad
3. For marriage
4. For funding your dream vacation
Eligibility Criteria :
Eligibility criteria will vary from bank to bank. But the common factors are:
1. His/her age
2. Income of individual
3. Value of property
4. Repayment track records for other loans, credit cards etc.
Personal Loan VS Loan Against Property :
1. Interest rate :
The rate of interest is the main key of information when you are availing for loan. Personal Loan is offered at the interest rate of 11% to 17.50% whereas Loan Against Property is offered at the interest rate of 8.95 to 9.80%.
2. Equated Monthly Installments(EMIs) :
As per the logic, if the interest rate is high, then EMI to be paid will also increase. Eventually we can say that the Personal loan EMIs are much higher than the Loan Against Property.
3. Loan Amount :
Since Loan Against Property is the secured loan, so you can get a higher loan amount generally upto 65% to 70% value of the property. But the Personal Loan is the unsecured loan, so you can get a limited amount of loan amount which depends on your income and repaying capability.
4. Loan Tenure :
In Loan Against Property, the loan tenure is longer than the Personal Loan. You can repay the loan amount over the period of 5 to 15 years depending upon your age, income etc. However in case of Personal Loan, you can repay your loan
amount over the period of 5 years.
5. Loan Processing :
In the processing of loan, Personal Loan get easily processed as the documentation is less here as compare to Loan Against Property. In Personal Loan bankers need to evaluate only your income and credit score. However, in Loan Against Property, the approval time is longer due to procedures of property document verification.
6. Extra Charges :
In Loan Against Property, processing fee charged is upto 1.5% of the loan amount but in case of Personal Loan processing fee charged is upto 2.5% of the loan amount.
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Personal Loan |
Loan Against Property |
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In Personal loan, an individual can take loan for personal use without any security. |
In Loan Against Property, an individual can take loan by mortgaging the property. |
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Rate Of Interest : 11% to 17.50% |
Rate Of Interest : 8.95 to 9.80% |
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Here, rate of interest is high, so Equated Monthly Installments (EMIs) are also high. |
However here rate of interest is low, so Equated Monthly Installments (EMIs) are low. |
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In Personal Loan, the maximum loan amount is determined by the individual income. |
In Loan Against Property, the maximum loan amount is determined by the maximum value of the property. |
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Here, maximum loan tenure is up to 5 years. |
Here, maximum loan tenure is up to 15 years. |
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Personal loan get easily processed as the documentation is less here. |
In Loan Against Property ,the approval time is longer due to lengthy procedures of property document verification. |
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It is a type of unsecured loan. |
It is a type of secured loan. |
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For Personal loan, fee charged by the bank is high (up to 2.5% of the loan amount). |
For Loan Against Property, fee charged by the bank is low (up to 1.5% of the loan amount). |
Which Loan should you take?
Both loans have their pros and cons, So it depends on your emergency and needs. If you want to get the loan urgently then you can go for Personal Loan. But if you want low interest rate, high amount loan, longer tenure then you can go for Loan Against Property.
