Loan Against Property or Personal Loan: Which one is Better?

Whether it is for residential or commercial property, there are plenty of ways by which people can arrange for the money. One of the most popular methods is by availing different types of loans; either a personal loan or a loan against property. So what are the main differences between these two types how do you know which one would be a better option?

Personal loans refer to those financing options which are granted for different personal uses and are generally unsecured. They are given based on the person’s integrity and ability to re-pay the bank or financial institution back.  They can be used for a variety of different purposes and there is no restriction on its usage.

On the other hand, a loan against property refers to those secured loans which are given or disbursed against the mortgage of property. They are taken for a variety of purposes; some of them being to expand one’s business, getting your son or daughter married, sending your son or daughter for higher studies abroad, funding a dream vacation or even can be used for funding medical treatments.

                             The main differences between the two are:

	Loan Against Property	Personal Loans
Purpose	They are taken by mortgaging the house property and are taken with some form of security.	They are taken for any personal purpose and are unsecured and have no guarantor.
Interest Rates	The rates of interest are usually between 12-16%, forming one of the cheapest retail loans.	The interest rates are higher and range between 16-21%
EMI Amount	As a result of the interest rate being lower, the EMI also turns out to be cheaper.	As a result of the rate of interest being higher, the EMI amounts too are high.
Loan Eligibility	The maximum loan eligibility is decided by the value of the income and property.	The maximum loan eligibility primarily is determined by the individual’s income level.
Loan Tenure	They have a maximum tenure of 15 years i.e. 180 months.	They have a maximum tenure of 5 years (i.e. 60 months)
Type of Loan	Secured	Unsecured

  

While a loan against property is considered to be one of the best ways to raise money there are also many disadvantages involved. If the borrower is unable to re-pay the loan back completely; either the financial institutions or bank can forfeit the property.

Housing Finance: Eligibility Criteria's Before Getting Home Loans in India

The real estate market in 2013 witnessed a number of challenges from high interest rates on housing loans and high property prices; to various other reasons such as the slowing of the economy, salary increments pared to the bare minimum and job losses mounting. There was thus a lower demand for housing, although many builders sought to woo customers with freebies, price discounts, schemes and high amount of bargaining. As a result the index price rose in 15 of the 20 cities that are covered by the NHB (National Housing Bank; i.e. the regulator and financier for the housing sector in India).

Although many different schemes and discounts were offered during the latter of 2013, many seeking home buyers did not respond to the offers as the head of research and Real Estate Intelligence Service of Jones Lang Lasalle India (a financial and professional services firm specializing in real estate services)had claimed that, "When prices are falling and you are getting a good deal, the psychology is to wait for an even better deal to come along". However, real estate prices are expected to correct in certain areas of the country during 2014.

Many home buyers rely on different home loans that are offered by different banks and financial institutions in the country so that they may purchase the house of their dreams. There are also many non-banking financial institutes which also offer these loans.

Furthermore, with the inflating prices of real estate in the country it is becoming increasingly difficult for an average middle class man to afford an apartment of his own; solely based on his own income. Of course, there are many other reasons such as buying a second property for investment purposes or as a vacation retreat.

However, there are many eligibility criteria's which a person has to meet before applying for such loans. Some of these factors include:

• Borrowing capacity: Aptly said "In order to get a loan, you need to prove you do not need it in the first place." One of the most important factors that banks take into consideration is whether you are capable of repaying the loan back to the bank.  Banks judge this by taking your monthly income into account (monthly net salary). Very often, the EMI would not exceed 40-50% of a person’s monthly income.

• Age: Age is one of the most important factors that banks pay attention to. It directly co-relates with the eligibility amount and banks often prefer customers to have 10-15 years on their side before retirement age.

• Existing loans and monthly outflows: Besides the other factors, further scrutiny of bank statements and one’s savings account help to reveal outflow towards any loans and a person’s monthly expenses. The amount of expenses should not be above 55-60 % of a person’s monthly income. If it is higher it reduces the loan eligibility.

There are many other factors such as monthly income, number of dependents, educational qualifications & relevant skill-sets, nature of business/profession or the type of industry that you work in, stability of income, whether there are any joint applicants and credit score which also play a major role. These factors may differ as per the lending institute providing the same.

Factors to take into Consideration When Availing Used Car Loans

When people usually think of buying a car, many of them would probably think of purchasing a second-hand or even a used-car; rather than a 'brand new one'. This is simple for the reason that it is less risky to drive a used car as opposed to a new car when you obtain a licence. Majority of the people who do, often seek financial aid when purchasing their first vehicle can rest assured that banks and financial institutions offer different financing options for the same. 

Applying for a car loan is often one of the preferred options by many car buyers, whether for new or used cars. Banks provide many different types of car loans; all offering different features. Besides this, there are also many car loan providers such as car dealerships which offer many different car loan options to people in India. Some of the different TYPES of loans include new car loans, pre-owned (used) car loan and a loan against car. Many of the car loan providers also offer different types of schemes for these loans. Some of them include margin money scheme, security deposit scheme, advance EMI scheme, lease financing purchase and hire purchase scheme. 

There are many different factors which need to be taken into consideration when availing for used car loans. Some of the factors include:

1) Model & Type of car: Banks and/or other financial institutions pay attention to the age of the vehicle, type and model before the issuance of the loan. It is always advisable to opt for a relatively newer model that is recently designed than an older version one.    

2) Total amount of car: Once the model of the car has been selected, it is very important to calculate how much money you are willing to put on the deal. Once this is calculated, you will have a good idea of how much loan you should take up.

3) Requirement: After you decide the loan amount that you require, it is very important to decide the tenure and the installments that will be paid either on a monthly or periodic basis. It is very important to take into consideration factors such as annual monthly income and even future predictions.  After this it becomes relatively easier to find sources for the loan that is required. 

4) Browse options: Most of the banks and financial institutions offer used car loans. It is very important to compare the loans that are offered by different banks as they will have different interest rates and different features. Some of these may include banks such as ICICI Bank, HDFC Bank, SBI bank or even institutions such as Magma Fincorp.

5) Necessary documents for verification: When availing these loans, various documents are required for the same. Authorization as well as attested proofs of the car purchase, income stability of the person (customer) and/or any other document that has been requested from the bank/financing institute. Only once these documents are submitted can a person avail the loan.