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Home Loan vs Loan Against Property: All You Need to Know

  • Highlights

  • Home loans are used to purchase homes

  • Loans against property are multi-purpose loans

  • Flexible tenor for loan against property

  • Avail top-up facility in loan against property

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.

Home Loan vs Loan Against Property

When it comes to secured advances, borrowers often get confused between loan against property and home loan. Both these financing options come with a host of features to cover high-end expenditures. However, there are some significant factors differentiating them.

Home Loan vs. Loan Against Property

Home Loan Loan Against Property
Usage Only for the construction of a house or purchasing a ready-to-move-in property Can be used for both business and personal requirements with no end-usage restriction
LTV Up to 90% of a property’s market value Up to 60 to 70% of the value
Interest rate Salaried - 9.05% to 10.30%
Self-employed - 9.35% to 11.15%
Salaried - 10.10% to 11.50%
Self-employed - 10.50% to 14.50%
Processing fees Self-employed - Up to 1.20%
Salaried - Up to 0.80%
Up to 1.5%

Considering similarities, both secured loans come with a longer repayment tenor up to 20 years, balance transfer facility, top-up loan, etc. Apply for one according to your financial requirements.

1. Quantum of Loan

Purchasing a house is easily one of the biggest expense an individual incurs in his lifetime. Real estate is expensive, and a lot of money is required to get your own house. To this effect, home loans grant a higher percentage compared to the value of the property – up to 90%. But, loans against property generally offer up to 60-70% of the property value.
However, Loan Against Property from Bajaj Finserv gives access to a higher loan amount that is enough to take care of the financial needs of most middle-class individuals. Salaried individuals can get up to Rs.1 crore while self-employed individuals can get up to Rs.3.5 crore.

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.

3. Loan Tenure

The tenure for both home loan and loan against property is significant. Typically, the tenure 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 tenure 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 loan benefits. 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.

Additional Read: A Step By Step Guide To Apply For An Loan Against Property

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