Loan Against Property Vs Personal loan

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16 JUNE, 2021

Availing a loan against property (LAP) or a personal loan can help you meet your monetary requirements with ease. The amount availed through these loans can be used for a any purpose such as funding your child’s higher education, managing wedding expenses or investing in a business. However, borrowers are often confused as to which of these - loan against property or personal loan - loans is a better option. We have enlisted the features of both LAP and personal loan, to help you make the right choice

Loan Against Property Vs Personal loan

Loan against property is a secured loan, wherein you can avail the loan amount by pledging your house or property as collateral with the bank. Loan against property can be taken against commercial, residential, and industrial properties, and the loan amount is usually 65-85% of the current market value of the property.

A personal loan is a multipurpose unsecured loan. Thus, you can avail a personal loan without pledging any collateral. With leading banks and financial institutions, you can easily apply for an instant personal loan from the comfort of your home.

The parameters mentioned below will help you determine which loan option will be more beneficial for you:

Eligibility

Loan against property has comparatively stringent eligibility criteria than personal loans. In case of LAP, lenders usually check the borrower’s repayment capacity, credit history, property’s value and age, etc. before processing the loan application. On the other hand, applicants with a decent credit score and steady monthly income can easily qualify for a personal loan.

Processing time

If you need urgent money, a personal loan could be a preferred option. With leading banks, you can avail a personal loan instantly provided you meet the eligibility criteria. Whereas, disbursal of loan against property can take around 2-3 weeks. The process of verifying various documents, evaluating property’s value, etc., makes LAP relatively time-consuming.

Loan amount

As loan against property is a secured loan, you can avail a significantly higher loan amount as compared to a personal loan. With Kotak Mahindra Bank, you can avail a loan against property between Rs 10 lakhs and Rs 5 crores depending upon your property’s value. On the other hand, personal loans are usually determined based on your monthly income, credit score, age, etc.

Loan tenure

The loan tenure depends upon the loan amount. Just like a home loan, loan against property is usually opted for a long term. Whereas, personal loans are availed for a short term. With Kotak, you can avail a loan against property for a maximum tenure of 15 years. The tenure for a personal loan ranges from 1 to 5 years.

Interest rate

The interest rate plays a crucial role in determining the overall cost of borrowing. A lower interest rate will help you save a large sum in the long run. Personal loans are unsecured loans, and hence have a higher interest rate ranging between 11%-24% per annum as compared to loan against property, which has an interest rate ranging anywhere between 10%-16% per annum .

You should analyse your requirements carefully and settle for the type of loan that suits you the best. Be it a personal loan or loan against property, you can easily apply for any of these loans with Kotak Mahindra Bank. Take care of your financial needs by availing a loan, today.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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