How Loan Against Property Is Different From Home Loan

People require loans for fulfilling various purposes. Moreover, if we try to reach out, there are a number of available loan types that can confuse anyone. From personal loan to home loan to loan against property, a range of loans is available to choose from. And thus, this establishes a string of confusion among them and even makes it difficult to make the right choice. Here we will dive deep into two types of loans, home loan and loan against property and find out how both are different from each other in many ways besides the fact people consider them similar.

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Home Loan Vs. Loan Against Property (LAP)

A prime example of the type of loans among which people easily get confused is Home Loan and LAP. Many a time, it is even observed that people use the same terms for each of them. So here are some fundamental differences between them.

Based On The Purpose Of Loan

A home loan is taken to buy a house which is ready to move in or for constructing a house or for booking an under-constructed apartment. Home loans are available for both residential and commercial purposes. Thus, in a home loan, the applicant does not possess the property before applying for the loan. On the other hand, Loan Against Property (LAP) is a loan which is taken against property. In this type of loan, the applicant already possesses the property and keeps it as collateral to take the loan and can use it for fulfilling any purpose like kickstarting a business, world tour or for funding any financial needs, etc.

Quantum Of Loan

Buying a house is not an easy dream to accomplish. A huge amount of funds is required to fulfil the purpose. Thus, the financial institution also understands the dynamic of real estate and therefore offer a grant of 90% of the total value of the house. Which means in a home loan 90% of the total cost of the property is given while in loan against property only 60% to 70% of the total amount of the property is offered as funds against it.

Interest Rate

In general, the interest rate of a home loan is lower than that of LAP. It is because the government focusses more on providing shelters to a larger number of people. Thus the interest rate of a home loan is kept lower and ranges in between 7% to 10% while in LAP the interest rate is 12%-15%.

Tenure

The tenure of a home loan is around 20 years in general while for LAP the tenure is a little lower of around 15 years. It also lowers down the EMIs for both the loans. Moreover, the loan tenure for both the cases is quite significant and gives you a lot of time to repay the loan.

Based On Collateral

Both the loans are secured loans and require collateral. In case of home loans, if you fail to repay the loan in time due to any reason the financial institution seizes your home. While in case of Loan Against Property the property which you are using for collateral is seized by the banks or other financial institutions if the loan remains unpaid after the completion of the tenure.

People require loans for fulfilling various purposes. Moreover, if we try to reach out, there are a number of available loan types that can confuse anyone. From personal loan to home loan to loan against property, a range of loans is available to choose from. And thus, this establishes a string of confusion among them and even makes it difficult to make the right choice. Here we will dive deep into two types of loans, home loan and loan against property and find out how both are different from each other in many ways besides the fact people consider them similar.

Home Loan Vs. Loan Against Property (LAP)

A prime example of the type of loans among which people easily get confused is Home Loan and LAP. Many a time, it is even observed that people use the same terms for each of them. So here are some fundamental differences between them.

Based On The Purpose Of Loan

A home loan is taken to buy a house which is ready to move in or for constructing a house or for booking an under-constructed apartment. Home loans are available for both residential and commercial purposes. Thus, in a home loan, the applicant does not possess the property before applying for the loan. On the other hand, Loan Against Property (LAP) is a loan which is taken against property. In this type of loan, the applicant already possesses the property and keeps it as collateral to take the loan and can use it for fulfilling any purpose like kickstarting a business, world tour or for funding any financial needs, etc.

Quantum Of Loan

Buying a house is not an easy dream to accomplish. A huge amount of funds is required to fulfil the purpose. Thus, the financial institution also understands the dynamic of real estate and therefore offer a grant of 90% of the total value of the house. Which means in a home loan 90% of the total cost of the property is given while in loan against property only 60% to 70% of the total amount of the property is offered as funds against it.

Interest Rate

In general, the interest rate of a home loan is lower than that of LAP. It is because the government focusses more on providing shelters to a larger number of people. Thus the interest rate of a home loan is kept lower and ranges in between 7% to 10% while in LAP the interest rate is 12%-15%.

Tenure

The tenure of a home loan is around 20 years in general while for LAP the tenure is a little lower of around 15 years. It also lowers down the EMIs for both the loans. Moreover, the loan tenure for both the cases is quite significant and gives you a lot of time to repay the loan.

Based On Collateral

Both the loans are secured loans and require collateral. In case of home loans, if you fail to repay the loan in time due to any reason the financial institution seizes your home. While in case of Loan Against Property the property which you are using for collateral is seized by the banks or other financial institutions if the loan remains unpaid after the completion of the tenure.

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