Loan Against Property vs. Personal Loan

Two main loan options are popular to get funds in times of need. Both loan options have their own advantages and disadvantages. So it's important to compare all the options we have and then choose our ideal loan option.

 The two loan options that we'll compare are: 

1. Personal Loan.
   
   
2. Loan Against Property.

Let's learn more about these options in detail :-

Personal LoanIt is an unsecured loan that can be availed at any bank or NBFCs across the nation. Customers have the complete flexibility to use the funds they get through personal loans freely. Banks don't monitor the end usage of the fund. 

So they can use the funds gotten from a personal loan for various purposes like: 

1. Wedding.
   
   
2. Vacation.
   
   
3. Child's Education Fee.
   
   
4. Debt Consolidation.
   
   
5. Down Payment.
   
   
6. Miscellaneous Expenses.

Borrowers have to repay the loan amount they have borrowed along with the interest rate. Missing even a single instalment can affect your credit score. So it's advisable to choose the repayment tenure and structure by comparing all the options available in the market. 

There are a lot of advantages that the customer can avail of by applying for a personal loan. 

We have mentioned some of the common advantages below: 

1. Hassle-free processing :- The entire process of personal loans is very quick, simple and hassle-free. You can easily get your personal loan application process within 2 to 7 business days. A lot of banks will approve your application quickly if you are someone who has a high credit score. You can even check your status using HDFC personal loan application status.
   
   
2. Unsecured :- Personal loan is an unsecured loan. So you don't have to pledge any asset as collateral or security. You can easily get funds through this loan even if you don't pledge any assets.
   
   
3. Flexibility :- banks have given customers the flexibility to use the funds they've got through personal loans freely. So they can use the funds for multiple purposes at the same time. However, the main rule of a personal loan business is that you can't use the funds for any illegal activities.
   
   
4. Credit Score :- You can use this personal loan as an opportunity to increase your credit score. To do this, you'll have to repay the instalments and EMI on time. And by doing this, you will notice a change in your credit score. So, a personal loan is an ideal option to increase your credit score.
   
   
5. Documentation :- The documentation process of the personal loan is very quick and simple. You'll have to complete the application form and attach some basic KYC documents and get it approved.

Loan Against Property (LAP)A loan against property is a loan option that can be used to get a high loan amount. For this loan option, you'll have to pledge your asset/property to get funds. The property you've pledged will be calculated at the market rate, and the actual market rate will determine the loan amount you'll get. 

Borrowers have to repay the amount they've borrowed from LAP along with the interest rate. In case the borrower can't repay the loan amount, and then the bank has every right to seize the property and sell it at an auction to recover the loan amount. 

Advantages of LAP

1. Interest Rate :- A loan against property is a secured loan, so the interest rate that the bank will charge is very low. The interest rate is usually between 12% to 22%. However, the interest rate charged will vary from one bank to another.
   
   
2. Availability :- You can easily apply for this loan option through any bank, financial institution or NBFC (Non-Banking Financial Companies) across the nation. So you get the flexibility to compare your options and then choose your ideal bank.
   
   

Repayment Tenure:- The repayment tenure for this loan option is up to 20 years. So if you're looking to get a high loan amount and repay it after some years. Then LAP is an ideal loan option.

Must Read:- PERSONAL LOAN - A SAVIOUR IN TIMES OF EMERGENCIES