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Loan Against Property vs Personal Loan: Key Differences

By Finserv MARKETS - Jul 31,2019
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Loan Against Property vs Personal Loan

If you are looking for a loan for personal purposes, the choice between a loan against property or a personal loan should not be a tough one. A loan against property (LAP) is a form of a secured borrowing from a financial institution against owned property or one currently under a home loan. A personal loan, on the other hand, is an unsecured borrowing (without collateral) used for personal purposes as well such as for marriage, business, or even education. According to the Reserve Bank of India data, personal loans accounted for 96% of the total new bank loans in the financial year 2018.

Finserv MARKETS offers LAP and personal loans with hassle-free disbursals, flexible tenures, part-payment facilities, and an online portal to track and access all relevant information. To enable you to make your decision, here are the important considerations and the key differences between the two forms of borrowings-

1- Tenure- LAP is ideally offered for a longer tenure and ascertained on the basis of age, income, property value, existing obligations (if any), employment status, and past credit records. Due to this long tenure, the Equated Monthly Installments (EMIs) for the loan are lower and allow the customer flexibility to maintain a higher disposable income. Contrary to LAP, personal loans from Finserv MARKETS are provided for a period of up to 5 years. Finserv MARKETS offers a tenure between 2 and 20 years for LAP- giving you the flexibility to opt for a short-term or long-term loan. For personal loans, it offers flexible payment tenures from 12 to 60 months.

2- Amount- The availability of a physical asset allows financial institutions security for the amount. While there are certain factors including property value and other due diligence that can impact the disbursed amount, the borrowing can be more substantial. For personal loans, that are unsecured borrowings, the amount can range between 15 and 20 lacs. Finserv market disburses personal loan based on your salary (criteria differs for tier 1 and tier 2 cities) and age.

3- The interest rate- An essential consideration while opting for a loan is the rate of interest. As LAP involves less risk for the institution, the interest rate can be considerably lower as opposed to a personal loan wherein higher risks are involved in repayment. Another great advantage of LAP is the floating rate option wherein the Loan Against Property interest rates can reduce as institutions provide benefits to the customer.

4- Disbursement time- For LAP, the turnaround time can be higher due to the time taken for property evaluation.

5- Prepayment- At times, customers may incur significant prepayment charges on personal loans and LAP for making multiple part payments. However, with the Loan Against Property option on Finserv MARKETS, there is no restriction on repaying the principal amount. The customer incurs a minimal fee on part-payment.

6- Top-up facility- While disbursing LAP, the financial institution looks at the prevailing market value of the property and provides an amount at a certain percentage of this value. If you have taken a loan of a certain amount with LAP, you can opt to increase the amount up to the maximum limit after authorization from the loan provider. Finserv MARKETS provides a fast online process for approval, requires minimal documentation, and customizes offerings for your convenience. Further, it offers a balance transfer facility on LAP with quick processing and no need for additional documentation. What’s more, you can track all your transactions online for a great banking experience.

You can also read more about gold loan vs personal loan.

“Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make It Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere”!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522