Loans against property are secured loans that use residential or commercial property as collateral. Immovable assets like your home or property guarantee banks in the form of collateral. This way you get a better chance of securing a more significant loan amount.
What is a personal loan, and what are its advantages?
Many of our expenses require quick funding, and a personal loan might help you. Personal loans could cover costs involved in a wedding or a family vacation, house improvements, or even debt consolidation. Personal loans to sort your immediate financial problems are very common these days, and you can achieve one in many ways.
And one such simple way is through an aadhar card. Today, the aadhar card is an important document that every individual of India holds uniquely. Since it has a requirement almost everywhere for professional or official works, you can also achieve loans on aadhar card hassle accessible by following a few easy processes.
Following is the list of personal loans advantages:
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You get an instant loan for any of your immediate requirements.
- Minimal paperwork and documentation.
- Quick loan sanctioning
- Collateral free
- Efficient, safe, and transparent process.
- It gives you the convenience to repay according to your time.
- Easy repayments and tenures.
How are loans against property different from personal loans?
| Personal loans | Loans against property | |
| Interest rate | Interest rates on personal loans are always a bit expensive, and it has more risk. As the process is based on the credit score and not against property which is why personal loans are unsecured. In general, the interest rate for a personal loan starts from 11% per annum. | Since loans against properties are secured loans, you can achieve them with the convenience of choosing between a fixed or floating interest rate. |
| Processing time | Lenders process personal loans usually faster than Loan Against Property, as the credit assessment process is faster and involves minimal steps. | Loans against the property, on the other hand, take longer to process. Here, the evaluation goes through an in-depth analysis and legalities of the property before the loan request is approved. |
| Loan tenure | The maximum loan tenure that a personal loan allows is five years. | The loan length offered in LAP is generally up to 15 years which makes it a favourable choice for many people. |
| Loan amount | The loan amount in a personal loan is usually limited, and it is determined based on your income and repaying ability. You can get a personal loan of thirty times your monthly payment. | Generally, up to 70% value of the property is provided as the loan amount considering your requirement. |
What are the disadvantages of loans against the property?
Although loans against property are beneficial in many ways but also hold some significant risks. Below are significant disadvantages of loans against property:
- High chances of hard inquiries
The bank will review all other checks, such as repayment capacity and credit score. Banks or financial organizations determine the loan-to-value ratio essentially from which you borrow money
- High risk of banks putting your property on sale
Since this is an asset-backed security, the bank can sell your home and recoup the debt. You should only take Loans against a property you are confident about meeting their commitments in terms of timely principal and interest payments.
Summing up:
If we pay close attention to these distinctions, we may find loans against property a better option than personal loans. However, this preference may vary from one person to another. In this regard, you can also seek help from any financial advisor like Buddy loan for a better guidance.