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Wealth & Money 459 views Sep 03, 2018
Know the Difference between Personal Loan and Loan Against Prop

Owing to their multipurpose use, a Personal Loan and a loan against property are two of the most widely availed financing options when it comes to meeting financial needs. Whether it is a wedding or debt consolidation, medical emergency or education, home renovation or business expansion, these loans can satisfy all types of monetary shortfalls.

Numerous banks and NBFCs come forward to help customers address these needs by offering such loans. Furthermore, owing to a high number of lenders, each becomes engaged in a battle to provide the most attractive loans against property and Personal Loan interest rates.
NBFCs also need customers to fulfill a few loans against property and Personal Loan eligibility criterions.

Leading non-banking financial company further provides additional benefits like pre-approved offers. These pre-approved offers are available with Personal Loans, home loans, business loans, EMI product financing, and other financial products.

Such benefits and multipurpose uses are the only two common grounds of Personal Loans and loans against property.

Now, the significant differences between these two loans include:

1) Type

Personal Loans are unsecured loans and are hence, collateral-free. Applicants need to have a credit score of 750 or above to avail this loan.
A loan against property is a secured loan and customers have to provide an asset as collateral to the lender. Either a house or a plot, the documents of such assets will remain with the lender until the full repayment of the loan.

If the customer defaults, the bank or NBFC will liquidate the property and fulfil the damages.

2) Loan amount

Customers can apply for Personal Loan up to Rs. 25 lakh from NBFCs like Bajaj Finserv. On the other hand, with loans against property, one can get up to Rs. 3.5 crore.

The amount that a customer avails through loans against properties will depend on the valuation of the asset.

3) Tenors

Majority of the lenders offer Personal Loans with a tenor of up to 5 years. Loans against property come with the tenor of up to 20 years or more.

By using a Personal Loan EMI calculator, one can check the EMIs based on the tenure and interest rates.

4) Interest rates

As loans against property are secured advances, their interest rates are also lower than Personal Loans. However, as loans against property have longer tenors, the total interest paid may be considerably more compared to Personal Loans.

In such situations, one can use a loan calculator to find out one’s EMIs and the total payable interest.

5) Processing time

Processing time in case of loans against property is longer than Personal Loans. Usually, a bank or NBFC can process the former within 72 hours and the latter within 24 hours.

A loan against property involves a more extensive processing time as lenders verify all the property documents and also give the property a physical inspection.

Contrarily, financial institutions require only minimal Personal Loan documents and can even approve such loans within 5 minutes.

These are the significant differences between a Personal Loan and a loan against property. Both of them offer something unique, and it solely depends on the individual which he/she wants to opt for.