Personal loan is a type of loan which provides finance for various financial purposes without any security. Lender sanctions personal loan based on the ability of the borrower to repay the loan. Which means lender analyses the credit history and monthly income of the borrower before sanctioning personal loan.
Loan against property is a type of secured loan which provides finance for various financial purposes and lender takes a property (commercial or residential) as a collateral against the loan. Which means when bank sanctions loan against property, they take property/land as security against the loan. Usually financial institutions offers 40 to 70% of the market value of the property in the form of loan and charges lower rate of interest as compare to other form of loan.
Differences Between Loan Against Property And Personal Loan
Although both Loan against property and personal loan can be used for various financial purposes like business expansion, marriage, studies, vacation or medical treatment but there are few major differences between both these loan types. So lets have details of the differences between both:-
LOAN AGINST PROPERTY
|Loan Type||Secured Loan||Unsecured Loan|
|Lender offers this loan by taking a property on mortgage.||Lender offers this loan without any security.|
|Rate Of Interest||Lender offers this loan usually in the range of 12% to 16%.||Lender offers this loan usually in the range of 15% to 22%.|
|Cheapest retail loan, which offers lower interest rates after home loans.||Expensive loan as compare to Loan against property.|
|Tenure||Lender offers LAP for a period of 1 to 15 years.||Lender offers PL for a period of 1 to 5 years.|
|Eligibility of LAP is determined by the value of the property mortgaged for loan.||Eligibility of PL is determined by the monthly income of the borrower.|
Loan against Property or Personal Loan – Which is better?
The above comparison helps us know the benefits and drawbacks of both LAP and personal loan to take decision which loan type is better. Comparing both, loan against property comes out to be a better choice as it offers us loan at lower rate of interest and longer repayment period.