Personal loan vs Loan against property resource-Banner_WC


Loan Against Property or Personal Loan_WC

2 min 23 Jun 2022
loan against property vs personal loan
  • Personal Loan vs Loan Against Property: Overview
  • Personal Loan vs Loan Against Property: Differentiating Factors


When you need emergency funds and your savings fall short, a personal loan can be one of the options that comes to mind. A personal loan helps meet a variety of financial needs; however, it comes at a significant cost – a heavy interest rate and a short tenor. Hence, a borrower must weigh all the pros and cons before they choose to proceed. In this case, a Loan Against Property can be a better option as it comes with better loan terms and benefits compared to its unsecured counterpart. 

In the past few years, both credit options have become quite popular. As a result, borrowers seeking to avail of funds have been asking an important question – which one is better? On this page, we help you assess which loan type would be more beneficial for you based on your financial needs.

Before that, let us understand what each loan type entails:

What is Personal Loan?

A personal loan is a type of loan where a borrower does not have to provide any security. Since the lender does not have any security which can be used to recover losses in case of default, personal loans often draw a high interest rate. 

Additional Read:  Types of Loans Available in India

What is Loan Against Property?

A Loan Against Property, on the other hand, is a secured loan type that lenders offer against a property. The property mortgaged stays as security with the lender until the borrower has paid off the entire loan amount. One can use the funds to finance for business expansion, their child's education or wedding, medical emergencies, etc. 

Now that we know what a personal loan and mortgage loan mean, the correct answer to which one is better depends on various factors. Let us look at each of these factors separately.

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

Personal Loan vs Loan Against Property: Differentiating Factors

Sizeable Loan Amount

If you need a sizeable loan amount, a Loan Against Property is always the better choice. Since personal loans are unsecured loans, lenders refrain from approving a big-ticket personal loan. More importantly, the amount you can avail of as a personal loan may solely depend on your personal income and repayment capacity.

For a Loan Against Property, however, lenders can release up to 70% of a property's current value – translating into a larger loan sanction.

Interest Rate

Personal loans draw a much higher interest rate than Loans Against Property. While the interest rate on personal loans can go up to 24%, the interest rates on Loans Against Property range from 8% to 16%. While one can negotiate a better interest rate, a Loan Against Property borrower has a better bargaining chip, namely their property collateral. 

Repayment Tenor

In the case of a personal loan, lenders keep the tenor to a maximum of five years. On the other hand, the tenor for a Loan Against Property can stretch up to 18 years, allowing you a considerable period to repay the loan amount without a high degree of interest accumulation.

Final Thoughts

Even if you find yourself drawn to a personal loan, consider the many offerings of a Loan Against Property and more importantly – what you stand to save when you borrow one. The latter does well in terms of cost sensitivity and borrower comfort.



While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

Loan Against Property vs. Personal Loan _RAC_WC