Home Loan vs Loan Against Property: A Complete Comparison

Loans are a viable means of meeting a variety of financial needs. Usually, many people do not have the information to choose the best type of loan for their specific needs. It’s easy to assume that a Home Loan means the same as a Loan Against Property. Many people get confused by the similarities between ‘home’ and ‘property.’ This confusion can be misleading for potential borrowers.

What is a Home Loan?

A Home Loan is a secured loan offering that aids borrowers in buying a property. The lender stays as the owner of the property until the borrower has paid off the EMIs. The borrower can only take back the ownership of the house after full loan repayment. In the event of a default, the lender retains ownership of the property indefinitely. 

What is a Loan Against Property?

Borrowers can avail of a Loan Against Property by using their property as collateral. In this case, the borrower must possess landed property, such as a personal house, or commercial properties such as offices or shopping complexes.

Home Loan vs Loan Against Property

To understand the differences between a Home Loan and a Loan against property, it’s important to explore the benefits they offer as well as the similarities between these offerings. Read on, to learn more.

Similarities

Below are the similarities to bear in mind between a Home Loan and a Loan Against Property.

• Sizeable loan sanctions
• Can be accessed by salaried, professional, and self-employed individuals
• Loans are repaid monthly as Equated Monthly Instalments (EMIs), inclusive of principal amount and interest
• Provided by lending institutions
• The loan tenor is usually long, with the Home Loan tenor ranging up to 30 years, and Loan Against Property tenor ranging up to 18 years 

Additional Read: Everything You Wanted to Know About a Loan Against Property

Differences

Below are some of the differences between a Home Loan and a Loan Against Property that you should know about.

1. Usage

Home Loans are exclusive, which means that a Home Loan can only be used for the purchase or renovation of a house. A Loan Against Property, on the other hand, is free from end-use restrictions.

2. Interest rate

The interest rates for Home Loans are lesser than the interest rates for Loans Against Property. The interest rates for a Bajaj Housing Finance Home Loan start at 8.60%* p.a. for salaried and professional individuals while the interest rates for a Loan Against Property start at 9.50%* p.a. for self-employed applicants. You can find out more details by clicking here. 

3. Loan Tenor and Repayment

Given its sizeable nature, a Home Loan usually has a loan tenor that’s pegged at a maximum of 30 years with repayment flexibility. A Loan Against Property also shares this flexible tenor attribute, but it’s usually set at a limit of 18 years. 

4. Loan to value (LTV) ratio 

For a Home Loan lender, parameters such as income, job security, and employment type hold a high regard to decide a specific Home Loan amount. However, the same need not be true in the case of a Loan Against Property where the loan amount is more dependent on the market value of the property you are mortgaging. 

5. Tax exemption 

In the case of a Home Loan, you are eligible for a tax deduction of up to Rs 1.5 lakh on the principal amount under Section 80C of the IT. For a Loan Against Property, you can avail a tax benefit under Section 24 of the IT Act only if you use the fund to buy a new house. 

Final Thoughts

Both Home Loans and Loans Against Property are sizeable and secured type of loans with an array of benefits. Bajaj Housing Finance offers Home Loan and Loan Against Property on competitive terms and a flexible repayment tenor.

*Terms and conditions apply

Additional Read: How to Avail of Tax Benefits on a Loan Against Property