Easy accessibility of loans and a wide range of home loan products have made life easier for the borrower. But sometimes the variety of options can make it a bit tough to decide which loan to go for when you are planning to apply for a loan. A case in point is when deciding between a loan against property and a home loan. Most people confuse these two different types of loans and use their names interchangeably. Apart from the fact that both of these loans are secured in nature. Both, a home loan and a loan against property are different when it comes to their usage, interest rates, tenor, LTV ratio, and processing fees.
A home loan is the amount of money borrowed by an individual from a lender such as banks or NBFCs to purchase a house. The loan amount and interest are repaid to the lender in form of EMIs over a period depending upon the tenure of the loan. The type of property for which a loan is taken could be a ready-to-move-in house or a vacant plot of land or an under-construction property. A home loan can be taken for both, personal and commercial property. It is a secured loan because the lender takes the property as security for a home loan. In case of default in repayment of the home loan, the lender can take possession of the property and sell it off to cover losses.
A loan against property is a secured loan taken against your residential or commercial property. A loan against property is preferred by many borrowers because it provides a high loan amount at low interest rates as compared to personal loans. If you have a property in your name and can provide documentation that establishes your ownership then you are eligible for a loan against the property. It can aid in fulfilling a variety of your financial requirements and has become a go-to option in recent times for most people.
Listed below are some key factors which highlight the difference between a home loan and a loan against property.
Even though a home loan and loan against property may sound similar to new borrowers, they differ in the purpose they serve. A home loan is what you need if you are thinking of buying a property be it commercial or personal. But if you are planning to take a loan for fund requirements that go beyond purchasing a house, a loan against property would be a good option.