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 Loan Against Property vs Personal Loan
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Loan Against Property vs Personal Loan

When you are in dire need of money and your bank accounts aren’t really helpful, you look to solve your monetary problems by borrowing money from various financial institutions and banks. This is of course for a temporary duration, after which you are expected to repay the original amount added with some interest amount as well. Now that there are various facilities provided by banks, we tend to sometimes get confused with exactly what type of loan we should be going in for. The most common confusion arises when someone is looking to borrow money for various reasons such as marriage, or vacation or higher education and so on.

The question is whether a loan against property or a personal loan would suit better?

Well, only you can answer that, but here’s what we can help you with:

Define your purpose.

When you avail a LAP or a PL, it is not necessary to disclose to the lending institution the purpose you are using your money for. First step would be to asses why do you require the money for, this will help you get an idea of the type of loan you would like to choose.

How much do you require?

If you are looking for funds above 25 lakhs, it would make sense for you to go ahead with a raising collateral and then taking a loan from a bank. Similarly, if you are looking for immediate requirements but below the sum of 20 – 25 lakhs then you can avail for a personal loan

How long will you take to repay?

Remember that, the more you borrow; the more you will be required to repay. Take an overall view of your finances and calculate how long your income will be supportive of your loan. It is especially important in the case of a loan against property, since it is a secured loan.

Let us take a look at some of key aspects of both the types of loans, at the end of which you should be in a position to decide.

Parameter

Loan Against Property

Personal Loan

Loan Amount range

25 lakhs – 7.5 crores

Up to 25 lakhs

Eligibility

Applicant’s Income + property value

Applicant’s Income only

Collateral

Yes (Flat or individual house)

No

Rate of Interest

12- 16%

13- 24%

Tenure

5 – 15 years

1 – 5 years

Advantages

  • Higher loan amount,

  • Longer tenure

  • Lower interest rate

  • Smaller emi

  • Quick processing

  • Shorter tenure

  • Flexible repayment options

Disadvantages

  • Longer processing time

  • Too many strict conditions to be fulfilled

  • If property has co-owners, they need to act as co-applicants

Higher rate of interest

 

Depending on your requirement, and the time you are willing to wait to get your money you may choose either one of the option.

A loan against property is easy to avail provided you have all the necessary documents in order. Especially with regards to your property, you need to have all the relevant proofs and approvals so that there would be no issues arising at the time of application. The processing time is typically longer since the bank has a legal and a technical team to physically ensure that your property is genuine.

Whereas in the case of a personal loan, there is no security required. Processing time is less than a week and there are a number of other flexible repayment options available. Also, there are company specific offers as well as seasonal offers provided by banks, which are indeed very helpful. The popularity of personal loans has proven to be one of the best ways of availing immediate funds.

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