Life is uncertain and, people have responsibilities. Whether you are planning a wedding for a loved one, paying for the education of your child, engaged in home renovation, or dreaming of expand your business, you need readily available funds. Based on your needs and circumstances, you can opt for different types of loans offered by lending institutions in India.
However, with many different types of loans available in the market, you might think which would be the best suited for your financial needs. In this article, we will look at the two most sought-after loans, i.e., Loan Against Property and Personal Loan.
This is a type of secured loan, where the lender holds the property of the borrower until the entire sum loaned out, is paid back. The property can be a residential building, commercial property. The money loaned can be used for expanding one’s business, medical emergency, house renovations, etc.
This is a type of unsecured loan, where the borrower does not pledge any security with the lender to avail the loan. The lender checks the credentials of the borrower, like credit score, monthly income, etc., before sanctioning the loan. The money loaned can be used to fund a holiday, buy a gadget, for wedding expenses, for one’s children’s education, etc.
Since LAP is a secured loan, the amount one can borrow is significantly higher than the amount that can be borrowed in the case of Personal Loan (of course depending on the value of the property).
Generally, in the case of LAP, one can avail amounts of up to 70% of the value of the property, secured with the lender. In the case of Personal Loan, the amount is limited, based on one’s income and repaying capacity.
When compared to Personal Loans, the interest rate of Loan Against Property is usually much lower as the lender has low risks in case of payment defaults by the borrower. The interest rates range from 9% to 14%, depending on the tenure of the loan and the monthly instalments for repayment agreed between parties.
Contrastingly, the interest rates of Personal Loans are much higher as it is an unsecured loan which increases the risk factor of the lender. Interest rates in the case of Personal Loans range from 11% to 24% depending on the borrower’s credit score, income, employment status, etc.
One can also get longer tenure, along with a higher loan amount, in the case of LAP. The maximum time allowed to repay the loan can be up to 20 years in the case of LAP. However, the longer tenure will result in high outgo on interest.
In the case of Personal Loan, the maximum time allowed to repay the amount loaned is usually five years. This is ideal for smaller loans.
This is an area where Personal Loan scores over LAP. The benefit and advantage of Personal Loan is that the processing is quick. The funds required are disbursed to the bank account of the borrower immediately after the lender approves it. Only the income and credit score of the borrower is taken into consideration.
But, in the case of LAP, the lending institution does a careful analysis of the property pledged by the borrower. It consists of internal checks, legal checks, and evaluation of the value of the property. It can take up to a month for LAPs to get approved.
A Personal Loan is an unsecured loan that enables you to borrow money without putting up any asset as security. While the repayment tenure varies among lenders, some financial institutions offer Personal Loans with a repayment period of up to five years.
A Personal Loan for Medical Emergencies is a type of loan that supports you financially during difficult times. This can include paying doctor’s fees, hospital bills, medication costs, nurse's charges, etc.
A Personal Loan for Travel can be used for all your travel-related costs. This loan can be availed of to purchase airline tickets and book hotel accommodations as well as paying for meals and transportation.
Everything should be flawless on your special day, including the venue, catering, decorations, and bridal outfit. As the name signifies, you can take a Personal Loan to cover different wedding expenses without any hassle.
Home Renovation Loans are collateral-free loans that can be used for expenses like paying for carpentry, masonry, buying furniture, fixtures, etc.
Loan Against Property is a type of secured loan in which the lender retains ownership of the collateral until the loan is fully repaid. The property may be either commercial, residential, or industrial. You can use the borrowed funds for home improvements, urgent medical expenses, or business expansion. Loan Against Property can be of different types:
A Commercial Loan Against Property is a type of loan provided to help businesses finance their operations or expand their property.
A Residential Loan Against Property is provided to financially support the borrower for the renovation of their houses.
Industrial Loans Against Property meet the financial needs of industries, such as manufacturing, and renovation of business infrastructure.
It all comes down to your individual needs. The best option in case of an emergency and quick disbursement of funds is Personal Loan, where the borrowed amount is also lesser. However, if you need a low interest rate, longer tenure, and a high loan amount, a Loan Against Property is the better option.
Poonawalla Fincorp offers both, ‘Loan against Property’ and ‘Personal Loan’, at affordable interest rates and fast processing. For more details, fill up an online form by clicking here and our representative will contact you.
Personal Loans are an excellent financing option during emergencies and speedy distribution of funds. A Loan Against Property is a preferable choice if you need a higher loan amount. However, it depends on the individual to select the type of loan that suits their financial requirements.
Large expenses can arise at any time. You may suddenly meet someone you want to marry, or you may decide to make a shift in your career
Banking and financial systems have evolved efficiently over time. Access to loans has become exceedingly easy in today’s fast-rising economy.
A loan against property can be used for various financial requirements. It can assist you with anything, right from purchasing a new home to the establishment of a new business. However, it is essential to understand the factors determining the loan against property interest rate.