With an increase in consumer spending, the need for additional funds has become common. In the current scenario, there are a plethora of options for sourcing the funds. However, when in dire need of money, loans can always come handy. Whether it is to fund the higher studies, or a medical emergency or a dream vacation, loans can be a lucrative way of financing the needs. Owing to the flexibility, a loan against the property and personal loan is the most sought-after options among the loans. As the lenders offer a wide variety of offers choose from, picking the right one can be tricky. Hence, it is essential to sift through the differences between the two to select the better one suited for your needs.
The interest rates offered
When availing a loan, the primary information you look at is the interest rate. A loan against property or property mortgage loan is a type of secured loan while the personal loan is unsecured. Most of the banks offer lower interest rates on secured loans compared to the rates on personal loans. Being a secured loan, a loan against land offers affordable interest rates. It also provides options like the floating rate to choose from, so that you get the benefits if the market interest rates go down.
Collateral for the loan
As the mortgage loan against property is availed with your property as collateral, the chances of loan approval are high. But personal loans can be taken without any collateral or security. This makes the LAP, a secured loan. The fact that a personal loan is availed without any collateral or security makes it unsecured.
Most of the people look for safer tenure period to repay the loan. Depending on the age, salary, and other factors, property mortgage loan will offer you a tenure of up to 15 years to repay your loan in EMI’s. This is a feasible option as the lower EMI means a higher monthly income for you. The typical tenure of personal loan can range anywhere from 12 and 60 months.
Maximum loan amount
In Loan Against Property, the maximum loan amount you can avail is up to 70% of the property value that is being used as security. The amount may vary according to the property, but this is mostly higher than the maximum loan amount offered by personal loans. The maximum loan amount provided on the personal banks usually does not exceed 25 lakhs.
Time to Process
Due to the additional processes, the time taken to process a loan against land is higher. As personal loans have less documentation and procedures, the loan can be instantly approved. The mortgage loan against property is usually approved after a thorough scrutiny of property-related documents and other legal formalities.