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Choosing between a home loan and a loan against property (LAP) can significantly impact your financial future. You must understand the differences, similarities, and benefits to make the right decision. A clear comparison will help you select the loan that best suits your needs without regrets. Missing out on the right choice could mean higher costs or less flexibility, so it is important you read carefully and choose wisely.
The main difference between a home loan and a loan against property lies in their purpose. A home loan helps you buy or construct a house. In contrast, LAP allows you to borrow against your existing property for various needs, such as business expansion, education, or medical expenses. Understanding this key difference between a home loan and a LAP can guide your borrowing decision.
A home loan is specifically designed to help you buy, build, or renovate a residential property. You can borrow a large amount based on your income and property value. The property you purchase acts as security for the lender until the loan is repaid. Lenders usually offer home loans at attractive interest rates with longer tenures, making it easier for you to manage repayments.
A loan against property (LAP) allows you to use your residential, commercial, or industrial property as collateral. You can raise funds for any personal or business need without selling your asset. The loan amount depends on the market value of your property. Because lenders view LAP as secured loans, you may enjoy lower interest rates compared to unsecured loans, but generally, the rates are slightly higher than home loans.
Understanding the differences between a home loan and a loan against property (LAP) helps you make a confident borrowing decision. Here is a complete comparison:
Features |
Home Loan |
Loan Against Property (LAP) |
|---|---|---|
Purpose |
To purchase, construct, or renovate a residential property |
To meet personal, business, or emergency financial needs |
Collateral |
The property being purchased |
An existing residential, commercial, or industrial property |
Loan Amount |
Up to 80%–90% of the property's cost |
Up to 60%–70% of the property's market value |
Tax Benefits |
Eligible for tax benefits under Sections 80C and 24(b) |
Limited or no tax benefits unless used for property purchase or construction |
Usage Restrictions |
Strictly for property-related purposes |
Flexible usage for business, education, medical, or personal needs |
Processing Time |
Faster, with straightforward documentation |
May take longer due to property valuation and additional checks |
Risk of Asset Loss |
Risk applies if loan repayments are defaulted |
Risk applies if loan repayments are defaulted |
Loan Disbursal Amount |
Based on property value and borrower’s income |
Based mainly on market value of pledged property |
Interest Type |
Fixed or floating interest rates available |
Fixed or floating interest rates available |
Despite their differences, there are also important similarities between home loan vs loan against property. Here are a few:
Collateral-based Loans
Both home loans and LAP are secured loans where you pledge a property as collateral. The lender holds rights over the property until you fully repay the loan.
Fixed or Floating Interest Rates
You can choose either a fixed or a floating interest rate option for both types of loans, allowing you flexibility based on your repayment planning.
Risk of Property Loss
If you default on repayments for either loan, the lender can legally take possession of the property and sell it to recover the outstanding dues.
Balance Transfer Facility
You can transfer both a home loan and a LAP to another lender if you find better terms or lower interest rates, subject to meeting eligibility criteria.
Similar Documentation Process
Both loans require comprehensive documentation, including identity proof, address proof, income statements, property documents, and other verification papers to complete the loan approval process.
Prepayment and Foreclosure Options
You have the option to prepay or foreclose both loans either partially or fully, depending on the terms and conditions set by your lender.
Impact on Credit Score
Repayments on both home loans and LAP directly affect your credit score. Timely payments improve your score, while defaults or delays can damage it.
Comparing interest rates and features helps you choose the most affordable and flexible borrowing option for your needs. Here is a side-by-side comparison of home loans and loans against property across leading lenders available on Bajaj Markets:
Lender |
Home Loan – Starting Interest Rate |
Home Loan – Max. Loan |
Home Loan – Max. Tenure |
LAP – Starting Interest Rate |
LAP – Max. Loan |
LAP – Max. Tenure |
|---|---|---|---|---|---|---|
Bajaj Housing Finance Ltd. |
8.10% |
₹15 Crores |
360 months (30 years) |
9.40% |
₹5 Crores |
216 months (18 years) |
PNB Housing Finance |
8.50% |
₹15 Crores |
360 months (30 years) |
9.25% |
₹15 Crores |
240 months (20 years) |
Home First Finance Company |
9.00% |
₹35 Lakhs |
240 months (20 years) |
14.00% |
₹50 Lakhs |
240 months (20 years) |
ICICI Bank |
9.00% |
₹5 Crores |
360 months (30 years) |
10.60% |
₹5 Crores |
180 months (15 years) |
LIC Housing Finance Ltd. |
8.65% |
₹15 Crores |
360 months (30 years) |
9.45% |
₹15 Crores |
180 months (15 years) |
Shubham Housing Development Finance Co. Ltd. |
9.90% |
₹50 Lakhs |
360 months (30 years) |
13.90% |
₹20 Lakhs |
180 months (15 years) |
Truhome Finance |
11.50% |
₹1 Crore |
300 months (25 years) |
14.75% |
₹1 Crore |
180 months (15 years) |
India Shelter Finance Corp. |
13.00% |
₹40 Lakhs |
240 months (20 years) |
15.00% |
₹30 Lakhs |
240 months (20 years) |
L&T Finance |
8.60% |
₹7.5 Crores |
300 months (25 years) |
9.60% |
₹7.5 Crores |
180 months (15 years) |
Disclaimer: The interest rates, loan amounts, and tenures mentioned above are indicative and subject to change based on the lender’s policies and your eligibility. Please check with the respective lender for the latest terms and conditions before applying.
Choosing between a home loan and a loan against property (LAP) depends on your purpose, financial situation, and future plans. Here are key points to help you decide:
A home loan is better if you are buying, constructing, or renovating a new house
Home loans usually offer lower interest rates compared to loans against property
You can get a longer repayment tenure, up to 30 years, when you take a home loan
Home loans also allow you to claim tax benefits on both principal and interest repayments
A loan against property is better if you need funds for business, education, or emergencies
You can use LAP for multiple purposes without restrictions, unlike a home loan which is purpose-specific
LAP generally has slightly higher interest rates compared to home loans because of flexible usage
You can unlock the value of your existing residential or commercial property through LAP without selling it
LAP typically offers a high loan amount, depending on the market value of your pledged property
If you want quick access to large funds without selling assets, LAP is often a good choice
You should choose a home loan if you seek long-term affordability and structured repayment options
You should choose LAP if you need immediate funds but are confident about repaying in a shorter tenure
The right choice depends on your financial goal, ability to repay, and future income stability
A loan against property (LAP) often provides higher loan amounts, as it is based on the market value of your pledged property. In comparison, home loans usually finance 80%–90% of the property's purchase value, depending on the lender and your eligibility.
Yes, there is a clear difference. Home loans generally offer longer tenures, often up to 30 years, while LAP tenures typically range between 15 and 20 years, depending on the lender’s policies.
Home loan interest rates usually start from around 8%, making them cheaper. In contrast, LAP interest rates generally begin at about 9% or higher, reflecting the broader usage flexibility offered by the loan.
Home loans offer tax benefits under Sections 80C and 24(b) of the Income Tax Act on both principal and interest repayments. Loan against property (LAP) generally does not provide such benefits unless the funds are used for property purchase or construction.
Yes, you can transfer your home loan or LAP to another lender using a balance transfer facility. This allows you to benefit from lower interest rates, better repayment terms, or reduced EMIs, depending on your current financial needs.
Choosing between home loan vs loan against property depends on your objective. If you are buying a new house, a home loan is better. However, if you need large funds for personal, business, or educational needs, LAP is more suitable.
One major disadvantage of LAP is the risk of losing your pledged property if you fail to repay the loan. Moreover, LAP usually carries higher interest rates compared to home loans, making repayments costlier over time.
Yes, there is a difference between a home loan and a loan against property. A home loan is meant for buying, constructing, or renovating a house, while a property loan (LAP) is a secured loan where you can raise funds for any personal or business need using your existing property as collateral.
Home loans are usually cheaper than LAP, offering lower starting interest rates. However, the actual cost of borrowing depends on the loan amount, credit score, tenure, and lender’s terms.
An overdraft (OD) provides flexible access to funds as needed, while LAP offers a lump sum amount secured against your property. LAP is better if you require a large sum upfront for planned expenses.
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