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.