To meet any financial goals or emergency requirements on an urgent basis, several people prefer to take a loan, but why choose a loan? A personal loan is one of the most demanding loans, and the interest rate of a personal loan is quite low compared to other loan options. Talking about the Loan Against Property and a home loan, these loans are beneficial for all and are completely safe, but make sure that before applying for the loan, check all the details about the financial lender.
Also, if you are not familiar with the credit types, then you need to know more about the difference between a home loan and a loan against property. In this blog, we are going to cover all the necessary points and explain what the difference between them is. Let’s take a deep dive at the points below and understand the difference.
Difference between a Loan Against Property and a Home Loan
Interest rate: One of the primary differences is the interest rate that’s being charged to the borrower when they apply for a loan. Generally, loan against property interest rates are high, and it is enlisted on home loans. The main reason is that several financial lenders and banks think that the possibility of defaulters on loans against property is higher. The RBI (Reserve Bank of India) always attempts to make housing affordable for all; due to this, the value of taking a home loan is low.
The documentation process: After applying for a home loan, the transaction process will take around 15 days to verify the documents. Therefore, the LAP loan transaction takes more time. This is a standard procedure for securing a loan from banks and financial lending institutions.
Loan to value: All banks and private institutions verify the monthly income, job security, and job type before approving the home loan amount, and it is a part of the verification. But, talking about the LAP, it is all dependent on the value of the property; usually, a person should get 90% of the home loan amount.
Tax exemption: When it comes to tax savings, a home loan is eligible for tax deductions up to Rs. 1.5 lakhs on the principal amount under Section 80C of the IT Act. But loans against property have not been subject to tax benefits, except if the loan amount is used for a new house under Section 24 of income tax.
What are the Advantages of a Loan Against Property?
Long repayment tenure: A loan against property has a long repayment tenure compared to other loans. A loan borrower can easily stretch up to 15 years.
Low-interest rates: As compared to other unsecured loans, such as personal loans, the interest rates of loan against Property have lower charges for a long-term tenure.
Less monthly EMIs: The longer the tenure, the lower the EMIs. The tenure of the loan against property is longer, and the EMIs also get low. It is beneficial for a borrower to pay every month.
Easy get to avail loan: It is easy to avail a loan against property because financial lenders and banks are willing to provide the credit and solve all your financial crisis.
Conclusion
The final decision is to choose between a home loan and a loan against the property; it all depends on the borrower's requirements and monthly income, or to explore banks and private lender websites for interest rates and document processing.