LAP vs Personal Loan

Loan against property vs. Personal loan - Which One is Better?

Banking and financial systems have evolved efficiently over time. Access to loans has become exceedingly easy in today’s fast-rising economy. There could be various reasons for requiring a little financial assistance- family wedding, buying your dream home, taking that long-overdue international vacation, etc. To pay for such financial obligations, you need to consider all the options at your disposal. Given the multitude of loans available, it’s natural to feel overwhelmed while making a choice. There is a very high possibility that the choice you are struggling to make is between taking a Loan against property or choosing an online Personal loan.

Before making a choice, let us get a basic understanding of what the two loans entail.
     
What is Loan against property?
 Loan against property, as the name implies, is a loan that is provided against residential or commercial property. This is essentially a secured loan, since funding is granted based on the valuation of the underlying collateral. The loan amount sanctioned will be a percentage of the property value, called as Loan-to-Value (LTV).

What is a Personal loan?
A Personal loan is an unsecured loan, which means you don’t need to put up collateral to get approval for financing. Due to this, the processing time for an online Personal loan is relatively short and the loan is disbursed quickly.  

 Loan against property or Personal loan—What should you choose?

We do understand that funding requirements could differ from person to person, and the loan you choose would be dependent on your specific circumstances. In order to help you make an informed choice, we have compared Loan against property and Personal loan on certain key parameters. Both have their own set of pros and cons. You just have to choose the one suitable for you-

Loan Amount and Tenure: Since it is a secured loan, and the loan disbursed is anchored to property value, Loan against property can give you access to higher loan amounts with longer repayment periods. In the case of a Personal loan, the amount sanctioned is generally lesser than Loan against property. Poonawalla Fincorp’s online Personal loan is therefore preferred by individuals seeking smaller and faster loans for shorter tenures. Because a Personal loan is an unsecured loan and has a shorter tenure, the EMI tends to be greater than that of a Loan against property. Though a Loan against property offers lower interest rates, the longer payout term makes it more expensive due to larger interest disbursement.

Processing Time: An online Personal loan is ideal for those looking for a speedy loan because the processing time is shorter than a Loan against property. Most Personal loans are now pre-approved and can be disbursed within few days or even few hours. The amount of a Personal loan is not secured by any security or property. Rather, your application will be evaluated solely on the basis of your steady monthly income and average credit score. On the other hand, a Loan against property, given its collateral-based structure, takes longer for approval. Before approving loan disbursement, the lender must verify the legitimacy of documents given by the borrower. The applicant may be required to go through a thorough verification process to confirm the property's ownership and market value.

Rate of Interest: Generally, a Personal loan is always more expensive than a Loan against property when it comes to interest rates. Poonawalla Fincorp provides an online Personal loan with competitive interest rates. It varies based on the borrower’s credit score and other factors as well. On the other hand, since a Loan against property is a secured loan, it can be availed at relatively lower interest rates. 

Credit Score: Because a Personal loan is an unsecured loan with a higher interest rate, paying your dues on time will significantly improve your credit score. A Loan against property is less risky since it is approved using the borrower's assets as collateral and has a lower interest rate. Though, in both circumstances, timely payment of dues can ensure that your credit score remains high, which may eventually aid you if you need a loan in the future.

Repayment: There is a risk of losing the property put up as collateral if the loan is not repaid in a timely manner. Hence, one must plan carefully before taking out this form of a loan. In the case of a Personal loan, failure to pay EMI will result in a late payment penalty levied on unpaid and overdue interest every month. It could potentially affect your credit score negatively.

Making the right choice

For a lot of reasons, it’s fair to believe that that both the loans are beneficial in different circumstances. A Loan against property is beneficial when the requirement is a large loan, with a long repayment schedule. This class of loan is a better fit when you want to finance a business expansion, buy another property, or even pay for your child’s education abroad.

 The Loan against property given by Poonawalla Fincorp has an easy approval process, requires minimum documentation, with competitive interest rates, and a flexible repayment schedule.


An online Personal Loan is faster in terms of the disbursal process and works better for borrowers interested in quick loans for a short period. If you want to finance your vacation abroad, renovate your house or even have multiple objectives that can’t be tied to one category, then Personal loan can work for you.

The online Personal loan given by Poonawalla Fincorp has minimum requirements, instant approval, quick disbursal and comes with prepayment perks.

 You must consider the overall characteristics of both kinds of loans before choosing the one that suits your needs and requirements best. Applying for a loan is a big step, and you need to ensure that you are choosing the right kind of loan, with a constructive plan in place to pay it off.

Selecting the right lender can make a significant difference to your experience. You can explore Loan against property and online Personal loan options offered by Poonawalla Fincorp for competitive rates, quick disbursal and a hassle-free loan experience.

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