Difference Against Home Loan and Loan Against Property

Are you planning to purchase a new house or need funds for your personal or business needs? If so, you might be considering two popular financing options – Home Loan and Loan Against Property. While both types of loans involve borrowing money against property, there are significant differences between them that can affect your decision.

Home loans are typically used to buy a residential property, such as a house or apartment, while Loan Against Property is a type of secured loan where you can use your existing property as collateral to get funds for various purposes.

In this article, we will dive into the details of Home Loan vs. Loan Against Property, and help you understand the differences between them, including interest rates, eligibility criteria, repayment terms, and more.

What is a Home Loan?

A Home Loan is a type of loan that is taken to buy a house or an apartment. It is a secured loan, which means that the property you’re buying is used as collateral for the loan. The lender will assess your creditworthiness and your ability to repay the loan before approving your Home Loan application. Once approved, you can use the funds to buy the property, and then repay the loan through monthly instalments over a fixed period of time.

What is a Loan Against Property?

A Loan Against Property is a type of secured loan where you can use your existing property as collateral to get funds for various purposes. You can use the loan amount to finance your personal or business needs, such as buying a new car, paying for a child’s education, starting a business, or renovating your home. The loan amount you can get depends on the value of the property you’re offering as collateral. The lender will assess your creditworthiness, your ability to repay the loan, and the value of the property before approving your Loan Against Property application. Once approved, you can use the funds as per your needs and repay the loan through monthly instalments over a fixed period of time.

Differences between Home Loan and Loan Against Property:

. Purpose:

The primary purpose of a Home Loan is to buy a house or an apartment, while the purpose of a Loan Against Property is to get funds for various personal or business needs.

. Loan amount:

The loan amount for a Home Loan depends on the value of the property you’re buying, while the loan amount for a Loan Against Property depends on the value of the property you’re offering as collateral.

. Interest rates:

The interest rates for a Home Loan are generally lower than the interest rates for a Loan Against Property. This is because the risk for the lender is lower in a Home Loan since the property being bought is new, and the loan amount is usually lower than that of a Loan Against Property.

. Eligibility criteria:

The eligibility criteria for a Home Loan and Loan Against Property differ. For a Home Loan, the lender will assess your income, credit score, age, and other factors to determine your eligibility. For a Loan Against Property, the lender will assess your credit score, the value of the property being offered as collateral, and your ability to repay the loan.

. Repayment terms:

The repayment terms for a Home Loan and Loan Against Property differ. Home Loans usually have a longer repayment period, ranging from 15 to 30 years. Loan Against Property, on the other hand, has a shorter repayment period, ranging from 5 to 15 years.

. Processing time:

The processing time for a Home Loan is usually longer than that of a Loan Against Property. This is because Home Loans involve more paperwork and verification processes, and the property being bought needs to be evaluated for its value and legal status.

Which one is right for you?

Whether you should opt for a Home Loan or a Loan Against Property depends on your specific needs and financial situation. If you’re buying a house or an apartment, and don’t have enough savings to make the purchase outright, a Home Loan might be a good option. On the other hand, if you have an existing property that you can use as collateral, and need funds for various purposes, a Loan Against Property might be a better option.