Loan Against Property vs. Personal Loan: Which Should You Choose?

When you are planning for a major expense, such as expanding your business or remodelling your home, it is important to choose the right type of loan. People often prefer two options: a Loan Against Property and a personal loan. Both loans offer quick access to funds. However, loan amount, interest rate, and repayment terms may differ.  

In this blog, we will break down the differences between a Loan Against Property and a personal loan, so that you can choose the best financial solution as per your requirement.  

What is a Loan Against Property?

A Loan Against Property is a secured loan. To avail of it, borrowers pledge their residential, commercial property as a collateral. Since the loan is backed by an asset, it comes with a competitive interest rate and flexible repayment tenure.  

What is a Personal Loan?

A personal loan is a type of unsecured loan. It does not require any collateral.  A personal loan can be approved based on the applicant’s credit score, income, and repayment capacity. While this makes it convenient, it can lead to a higher interest rate and a shorter repayment tenure. 

Loan Against Property vs. Personal Loan: A Summarised Comparison 

The following table shows the comparison between a Loan Against Property and a personal loan:  

Benefits of a Loan Against Property

1. Lower Interest Rates

The property loan interest rate plays a key role in determining how feasible a loan will be over time. Since personal loans are unsecured, they typically come with higher interest rates. On the other hand, a Loan Against Property is secured by a collateral and is offered at a relatively lower interest rate.  

2. Higher Loan Amount 

Looking for substantial funding? A Loan Against Property can allow you to access a sizeable sum based on your property’s market value and your financial profile, as compared to a personal loan.  

3. Longer Repayment Tenure

With Bajaj Housing Finance, you can repay a Loan Against Property over a longer tenure of up to 17 years. This allows for more manageable EMIs. However, personal loans usually come with shorter tenures. This can lead to higher EMIs. 

Tips to Choose the Right Loan Against Property

Planning to opt for a Loan Against Property? Opting for it can be a smart financial move when you need a large sum at a competitive interest rate. However, to make the most of it, it is important to choose the loan carefully. Here are some practical tips to help you pick the right Loan Against Property for your needs: 

1. Assess the Property’s Value

The loan amount you can borrow depends on the market value of the property you are pledging, along with other factors such as your credit score, age, and income. You can use a Loan-To-Value Calculator by Bajaj Housing Finance to estimate the loan amount you can borrow. You need to select your employment type and enter your property value.  Then select the property type, tenure, and the rate of interest. The calculator will display your eligibility and the EMI amount.  

2. Compare Interest Rates

Even a slight difference in interest rates affects the total amount payable by the end of the tenure. Look for a lender that offers competitive rates and transparent terms. A lower rate not only reduces your EMI but also the total cost of borrowing. 

3. Repayment Tenure

Opting for a lender who offers a long repayment tenure can ensure easy EMIs.  

4. Evaluate Processing Time and Documentation 

Quick processing, approval, and disbursal are important, especially when you require funds urgently. It is wise to opt for a lender that offers quick approval and disbursal.  

5. Consider Additional Charges

It is important to account for additional costs associated with a Loan Against Property. Charges such as processing fees and penal charges can differ from one lender to another and may affect the total cost of your loan. 

How to Apply for a Loan Against Property Online? 

Applying for a Loan Against Property in India is a quick and hassle-free process. Once you have estimated the loan amount and EMIs, follow these simple steps to submit your application: 

1. Visit our Loan Against Property application form and fill in basic personal details, such as your name, contact number, and employment category. 
2. Share your preferred loan type along with your net monthly income.  
3. Enter the PIN code and the loan amount you wish to apply for. 
4. After entering the OTP sent to your mobile number, proceed to provide additional information related to your finances and property. 
5. Finally, click on ‘Submit’ to complete your application. 

After submission, a Bajaj Housing Finance representative will reach out to you within 24 hours* to assist with the next steps, which include document submission and verification. 

*Terms and conditions apply.