Individuals require loans for various purposes. There are so many products in the market that a person can get easily confused. A prime example of this is a home loan and a loan against property (also known by terms such as a mortgage loan and LAP).
Some often tend to use the same term for these two totally different products. A home loan is a loan that is taken to facilitate the purchase or construction of a new home; that is, the property does not already belong to the loan applicant. Whereas, a loan against property is taken by keeping an existing property as security, with the loan taken being used to fulfil a variety of purposes. Here, we will discuss the differences between these two types of loans.
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2. Interest rate
The interest rate of the home loan is lower than that of loan against property. This is because the government and the Reserve Bank of India (RBI) is focussed on making housing affordable for all, and the result of this is minimizing the margin requirement of a home loan.
Loans against property from Bajaj Finserv not only give affordable interest rates but also come with a Flexi Hybrid feature that helps you better manage your finances by paying interest-only EMIs. Also, interest is charged only on the amount utilized from the loan limit.
3. Loan tenor
The tenor for both home loans and loans against property is significant. Typically, the tenor for home loans lasts for 20 years. Loan against property is also a high-value loan and takes several years to pay back. They usually come with a tenor of 15 years.
In case of Loan Against Property from Bajaj Finserv, flexible tenors are available that range from a maximum of 20 years for an individual and up to 18 years for self-employed individuals. Additionally, full or part pre-payment can be done at any time with minimal charges.
4. Top-up facility
Most loans against property offer an option of a top-up facility. This means that you can get more funding on your existing loan. This feature brings in more flexibility and the money can be used to serve different financial requirements. Home loans normally don’t come with this facility, though some banks do offer them after further assessment.
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