A "low interest" loan shouldn't mean you have very little interest in paying it back!
  • Loan Against Property vs. Personal Loan

    At some point in time, we may find ourselves in a situation where we are in dire need of cash. The purpose can be anything, ranging from emergency medical expenses to higher education. To meet those financial requirements, we may have many options at our disposal. However, two of the most sought-after paths are taking a loan against property and personal loan. In this article, we will look at the two and examine which one is better, based on certain key parameters.

    What is Loan Against Property (LAP)?

    As the name suggests, the loan, in this case, is taken against the property. The property, which can either be residential, commercial or a plot, is used as collateral to secure the loan. The proceeds of this loan can be used for any purpose.

    What is Personal Loan (PL)?

    A personal loan is an unsecured loan that one can avail from any financial institution or lender for personal use. The funds here can be used for any purpose, similar to that in loan against property.

    How the Loan Against Property different from Personal Loan?

    The two types of loans differ vastly when it comes to certain important parameters that one looks at while availing a loan. These parameters are nothing short of deciding factors and should help you evaluate which of the two options is more feasible for your situation.

    • Rate of Interest When it comes to availing a loan, the first thing that we look at is the rate of interest.

    A loan against property is a secured loan and as a result, the interest rates offered here are lower than those that come with personal loans. For a LAP, the interest rate can be anywhere between 11%-16% per annum.

    On the other hand, since no security is needed to avail personal loan, the interest rates, in this case, are generally high, ranging between 11%-24% per annum.

    Therefore, from the interest rate perspective, a loan against property is a superior option in comparison to personal loan.

    • Equated Monthly Installments (EMI)

    If the rate of interest is high, then the EMI sum that is to be paid is high. As a result, personal loan EMIs are much higher than its counterpart under loan against property.

    • Loan Tenure

    If you choose to take a loan against property, then you can repay your loan over a period of 5-15 years, depending on the bank and other factors. This works out to be quite feasible, especially if the loan amount is large. However, keep in mind that you will end up paying more interest.

    However, the maximum repayment period allowed to clear a personal loan is 5 years. This is ideal, provided the loan amount to be repaid is not high.

    • Quantum of Loan

    When it comes to loan against property, the loan amount will be 40%-70% of the property that is being used as collateral. This is suitable if you are in need of a larger sum. The loan amount can be in crores, depending on the value of the property.

    As for the personal loan, the loan amount will depend greatly on your monthly income, followed by other factors such as credit score, age, et cetera. A lender will sanction the personal loan depending on your ability to repay the sum. Hence, the quantum of the loan, in this scenario, is highly subjective. Nonetheless, the limit here can be anywhere between Rs.10-15 lakh.

    • Time to Process the Loan

    As mentioned earlier, a personal loan is an unsecured type of loan. Lenders will not ask you for any collateral and as a result, the processing time will be quick. All they will do is evaluate your monthly income and your credit score, which in turn, may lead to your loan application get approved in just a week.

    However, if you are taking a loan against your property, the approval time may be anywhere between 15-30 days. This is because the lender will check the authenticity of the property-related documents before releasing the loan amount. If the property has multiple owners, a no objection certificate has to be signed by every owner before the loan can be approved. Furthermore, you may be asked to submit an income proof to evaluate your loan repayment ability.

    • Failing to Repay the Loan

    If you fail to repay the loan that you have taken against your property, then you stand to lose the property that you have put as collateral. Hence, plan carefully before availing this particular type of loan.

    In the case of personal loan, the consequences of not repaying will lead to an increase in the interest amount that is to be paid. It may also affect your credit score negatively.

    The Following Table Summarises the Aforementioned Factors:

    Parameter Loan Against Property Personal Loan
    Interest Rate Low interest rates; 11%-16% per annum High interest rates; 11%-24% per annum
    Loan Quantum Depends on the market value of the property; 40%-70% of the property’s value Depends on the monthly income, credit score and the ability to repay the loan
    Loan Tenure 10-15 years, depending on the bank 1-5 years
    Processing Time Processing time is long since property-related documents are to be verified Processing time is short since no collateral is needed
    EMI EMI to be paid is significantly low, owing to low interest rates EMI to be paid is high, since the interest rates are high

    Hence, as you can see, personal loan and loan against property have their own set of pros and cons. If you are in need of a small sum urgently, then you should opt for a personal loan. However, if you need a large sum, then you should consider taking a loan against your property. However, the loan, in this case, will take some time to be approved.

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    Home Loan Reviews

    • DHFL Home Loan
      "Not satifactory service"
      0.5 1.0/5 "Really Bad"
      I got home loan with DHFL FINANCIAL INSTITUTION . I am not happy with the services even the customer service response is not so good . The loan amount which they gave was good but they charge very high rate of interest . Overall it is fine experience .
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 22, 2019
    • LIC Housing Home Loan
      "Should be transparent and prompt"
      0.5 1.0/5 "Really Bad"
      I have housing loan from LIC, the interest is high. My property located in lucknow but I am staying in mumbai hence for the balance transfer its very difficult they need lots of loan documents. Without proper notification they increased the interest but for the reduction they have lots of procedure and I need to pay Rs.1000.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 22, 2019
    • LIC Housing Home Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      LIC HOUSING FINANCE has also offered me a home loan. The process was quick and I got the loan on time. The rate of interest is and there were processing charges as well both are very nominal compare to others in the market . The tenure period is 10 year and it is sufficient .
      Was this review helpful? 0
      , vadodara
      Reviewed on Apr 21, 2019
    • review Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have SHAMRAO BANK i have took home loan from this bank . Their service is better, Overall the whole loan process was easy and hassle free. Only the rate of interest were high with this bank. The processing fee is nominal with this bank . And the loan amount is not satisfactory .
      Was this review helpful? 0
      , pune
      Reviewed on Apr 21, 2019
    • HDFC Limited Home Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      HDFC LIMITED is the bank where i have taken the housing loan the loan amount they have offered was good and satisfactory added on that the documentation process was simple and pretty simple documents. I got the loan within one day, the rate of interest was nominal.
      Was this review helpful? 1
      , bangalore
      Reviewed on Apr 20, 2019
    • DHFL Home Loan
      "Very good service"
      0.5 4.0/5 "Great!"
      I had taken a Home Loan from DHFL LTD a long time back and the loan is still running. The loan amount has been sufficient but the interest rate with them has been quite high, where they had not reduced the interest rate as well. The processing fee and charges which they had made has also been high when compared with the other banks.
      Was this review helpful? 1
      , faridabad
      Reviewed on Apr 20, 2019
    • HDFC Limited Home Loan
      "Interest rate should be reduced"
      0.5 4.0/5 "Great!"
      My housing loan process was simple with HDFC Ltd, they took only 3 working days to verify and sanction the amount, they didn't ask any guarantor for my loan, but I feel the interest is bit higher, I took the amount of Rs. 5 lakhs for the duration of five years.
      Was this review helpful? 1
      , hyderabad
      Reviewed on Apr 20, 2019
    • ICICI Bank Home Loan
      "GOOD"
      0.5 5.0/5 "Blown Away!"
      I have applied or the housing loan with the ICICI BANK the documentation process was simple and easy to get the loan they have given the 95% of value as a loan amount. The duration for repaying the loan is for 20 years and using from last 2 years. The rate of interest was 8.6% which was nominal.
      Was this review helpful? 2
      , pune
      Reviewed on Apr 19, 2019
    • LIC Housing Home Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I took my housing loan with LIC HOUSING FINANCE previously, They gave me sufficient loan amount based on the requirement, but i felt they have charged me high rate of interest and even they have charged me processing fee high, so i have done balance transfer to other bank.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Apr 19, 2019
    • Bajaj Finserv Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I did balance transfer from one bank to Bajaj finserv for housing loan, the loan amount was sufficient, but rate of interest i felt was less compare to other bank loan, the rate of interest they have charged me up to 8.85% which was nominal, everything is good but i did not like one thing ,like after doing balance transfer i came to know that it is mandatory to pay insurance for premium it use to get lock after paying insurance, i can not do in future balance transfer .
      Was this review helpful? 2
      , hyderabad
      Reviewed on Apr 19, 2019
    • Indiabulls Home Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I hold my housing loan with Indiabulls for an while. They have given me loan on time without any delay, their service was good. The process in getting loan was simple, i got loan on time. Their rate of interest was nominal, still this loan is running.
      Was this review helpful? 2
      , new delhi
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Very good"
      0.5 4.0/5 "Great!"
      Last 4month back I took one home loan from HDFC Limited , but I am not satisfied with their rate of interest since it is little high , and loan amount is 30L I am satisfied with loan amount and and EMI amount is 25K and tenure is 25years , but their customer service is not much good ,and response not at a time.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Best service"
      0.5 4.5/5 "Excellent!"
      I hold my housing loan with HDFC LIMITED for an while, their service is good, but not sure about the rate of interest like every 2-3 months they are increasing my limit up to 0.05% i need to check with the customer care regarding this, the loan amount was sufficient, they have not charged me processing fee.
      Was this review helpful? 1
      , bangalore
      Reviewed on Apr 19, 2019
    • IIFL Home Loan
      "NOT SATISFIED"
      0.5 1.0/5 "Really Bad"
      I have previously used the housing loan with the INDIA INFOLINE HOUSING FINANCE LTD and transferred to another bank because the rate of interest was higher. They have offered the pre approved so taken. There are hidden charges applicable also it is floating rate of interest with this bank which was 32% which am not happy.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "GOOD"
      0.5 4.0/5 "Great!"
      The documentation process was easy and simple with the HDFC LIMITED and housing loan was taken before few days. The rate of interest was lesser so transfered the loan with this bank. The duration is for 30 years to repay the loan. There is a pre closure option with this loan.
      Was this review helpful? 2
      , mumbai
      Reviewed on Apr 19, 2019
    • HDFC Limited Home Loan
      "Very good"
      0.5 4.0/5 "Great!"
      I am satisfied with loan amount of 8L with the rate of interest is 8.65% , EMI amount is 6769 rupees and tenure is 20years. It was taken last two years back from HDFC LIMITED and their overall service is good but I would like close this loan after 3 to 4 months.
      Was this review helpful? 2
      , new delhi
      Reviewed on Apr 17, 2019
    • Bank Bazaar Home Loan
      "balance transfer"
      0.5 4.0/5 "Great!"
      i like your offer...t is the first time experience with the Bankbazaar.com and i have a good experience with this channel. I prefer using it through the mobile application as the application is simple and user friendly to access. The customer service is good.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 17, 2019
    • Axis Bank Home Loan
      "Process is good"
      0.5 5.0/5 "Blown Away!"
      My home loan is with Axis Bank and the process to get the loan is good. The disbursement happened on time and the customer support and response is good. The documentation was also a smooth process. The rate of interest and processing charges is normal.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 17, 2019
    • IDBI Home Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I took housing loan with IDBI bank for an while, the loan amount which they have given me was good, it was sufficient based on my requirement, the rate of interest and their processing fee which they have charged me was nominal, AS it is government bank their service is not that up to the mark, but the interest rate was less so i applied.
      Was this review helpful? 1
      , mumbai
      Reviewed on Apr 17, 2019
    • LIC Housing Home Loan
      "Interest rate should be reduced"
      0.5 4.0/5 "Great!"
      LIC housing is good but interest is the concern, I took the amount Rs. 20 lakhs for 20 years. They quoted 10.8% its a floating one, they didn't revise the interest as per the RBI guideline. But they do have balance transfer, part payment and other options.
      Was this review helpful? 1
      , chennai
      Reviewed on Apr 17, 2019
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