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Choosing between a loan against property and a personal loan depends on your financial goals, asset ownership, and repayment capacity. Both loans provide access to funds, but differ in terms of interest rates, loan amount, tenure, and approval process.
It is therefore important to understand the difference between personal loan and loan against property to make an informed decision when choosing a suitable credit option.
A Loan Against Property (LAP) is a secured form of credit that allows you to borrow money by pledging your residential or commercial property as collateral. You continue to own and use the property while repaying the loan.
A Loan Against Property is a secured loan provided by banks or financial institutions against owned property. The property can be residential, commercial, or even a piece of land. The loan amount is usually a percentage of the property's market value, generally ranging from 50% to 70%. Borrowers can use the funds for personal, medical, or business purposes, making it a versatile financing option.
The loan is granted against a property that remains in the borrower’s possession but is pledged to the lender until full repayment.
Since it is secured, lenders are willing to offer larger amounts, often in the range of ₹10 Lakhs to several crores, depending on the property's value.
LAP typically has lower interest rates than personal loans due to reduced risk for the lender. Rates vary based on lender and borrower profile.
Tenures can range from 10 to 20 years, offering flexibility and manageable EMIs.
There are no restrictions on usage. The borrower may use the funds for business expansion, education, medical emergencies, or personal needs.
Lower interest rates compared to unsecured loans
Higher loan eligibility based on property value
Long repayment tenures reduce EMI burden
Flexible end-use of funds
Processing time is longer due to property valuation and legal checks
Risk of losing property in case of default
Requires property ownership and documentation
May involve additional charges like valuation and legal fees
A personal loan is an unsecured loan that allows individuals to borrow money without pledging any asset as collateral. It is best suited for urgent or short-term financial needs such as medical expenses, weddings, travel, or home repairs. The loan is approved based on your income, credit score, and repayment capacity.
A personal loan is a form of credit offered by banks, NBFCs, and digital lenders. It does not require any security or collateral. The loan amount depends on your income, credit history, and existing liabilities. Approval and disbursal are usually faster than secured loans, making it a preferred option during emergencies or for short-term goals.
No need to pledge property or assets. Lenders assess creditworthiness based on income, credit score, and repayment history.
Many lenders offer same-day or next-day approval and transfer of funds, especially via online application channels.
Repayment tenures usually range from 12 to 60 months, allowing you to choose what suits your budget.
Interest rates can either remain constant or vary over the loan period. Rates depend on lender policies and borrower risk profile.
Borrowers can use the loan amount for any legal purpose, including medical emergencies, education, debt consolidation, or travel.
No collateral needed for approval
Faster processing and disbursal
Minimal documentation required
Useful for short-term or emergency needs
Higher interest rates compared to secured loans
Lower loan amount eligibility
Shorter tenure means higher EMIs
Approval depends heavily on credit score and income stability
When comparing a loan against property vs personal loan, it’s important to understand how each option serves different financial needs.
The table below outlines key factors to help you make an informed choice:
Criteria |
Loan Against Property (LAP) |
Personal Loan |
|---|---|---|
Loan Type |
Secured loan where you pledge property as collateral |
Unsecured loan that does not require any collateral |
Interest Rates |
Usually comes with lower rates, since the loan is backed by an asset |
Comparatively higher rates due to higher lender risk |
Loan Amount |
Usually, up to 70% of the property’s market value, often going into several crores |
Generally, up to ₹50 Lakhs, based on income and credit profile |
Tenure |
Repayment tenure can go up to 15–20 years, making it suitable for long-term financial needs |
Up to 5 years, ideal for short to medium-term needs |
Approval Time |
May take 1 to 3 weeks, as property valuation and legal checks are involved |
Usually processed within 24–72 hours, especially via digital lenders |
Risk |
Property may be auctioned if you default on repayments |
No asset risk, but missed EMIs can affect credit score |
Eligibility |
Based on property ownership, income stability, and documentation |
Based on income, credit score, and existing financial obligations |
Processing Charges |
May include valuation fees, legal costs, and standard processing charges |
Typically involves only standard processing fees and taxes |
Disclaimer: Above given details may vary by lender. Figures provided are indicative and for general guidance only.
The choice between LAP vs personal loan depends on your needs and resources. If you need a large sum and own property, a loan against property offers lower interest rates and longer tenures. If your need is urgent or short-term, and you prefer quick disbursal without risking your assets, a personal loan is more suitable. Carefully assess your repayment ability, timeline, and risk tolerance before making a decision. In any loan comparison in India, always read the terms and charges thoroughly before applying.
A personal loan is unsecured and approved based on income and credit score. A loan against property is secured using your property as collateral and usually offers lower interest rates.
Loan against property generally offers lower interest rates since it's secured. Personal loans are riskier for lenders and thus carry higher rates.
Yes. LAP allows higher loan amounts based on the property's market value, while personal loans have stricter limits linked to income and creditworthiness.
A personal loan is easier and faster to get, as it does not involve property verification or collateral evaluation.
LAP processing can take 1 to 3 weeks, depending on property evaluation, documentation, and legal checks.
LAP tenures can go up to 15–20 years, while personal loans usually offer shorter tenures of 1 to 5 years.
It depends on your needs. Choose a personal loan for urgent, small expenses. Opt for LAP if you need a larger amount with lower interest and longer tenure.
The main risk is loss of property if you default. Also, the process is slower and involves additional legal and valuation checks.
An overdraft (OD) is flexible but may have higher interest and daily charges. A personal loan is fixed and predictable. Choose based on usage pattern and control preference.
LAP is better for large one-time needs with lower rates. OD suits short-term, fluctuating needs but may be costlier if used long-term.
Yes, you can withdraw cash from an overdraft facility, up to the approved limit. However, interest is charged on the withdrawn amount daily.
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