Individuals who are looking for a loan to finance a specific goal or emergency have many options to choose from. However, with many loan products on the market, it has become confusing for people to decide which one is best suited to their requirements.
When it comes to buying property, most people consider taking a home loan because it offers the longest repayment tenure and lower interest rates than other loans. On the other hand, a loan against property is also a popular choice because it offers higher loan amounts and can be used for multiple purposes.
To help you make a better decision, here is a detailed comparison of home loans and loans against property:
Home Loan v/s Loan Against Property
When it comes to taking a loan, it boils down to these choices. Both have their own set of pros and cons, and it is essential to understand the difference between a home loan and a loan against property.
- Home loans are taken for buying a house, whereas a loan against property can be used for various purposes, such as business expansion, education, etc.
- The interest rate on home loans is generally less than that of loans against property.
- Home loan tenure is shorter than loan against property tenure.
The processing fee for home loans is lower than that of loans against property. - The eligibility criteria for a home loan are generally less stringent than for a loan against property.
- Documents required for a home loan are fewer in number than those required for a loan against property.
- There is no tax exemption for loans against property, whilst home loans are exempt under section 24 for interest & 80C for the principal.
Things You Need to Know before Applying for a Loan Against Property
- Know the value of your property: The initial thing you need to know is how much your property is worth. This will help you understand how much loan you can avail of.
- Check your eligibility: The second thing you need to do is check your eligibility for the loan against property. The criteria for this may vary from lender to lender, but generally, you should be above the age of 18 years and have a regular income.
- Compare the interest rate and lenders: It is significant to compare the interest rates and lenders before availing of a loan against property. This will help you get the best deal possible.
- Documents required: The documents required for a loan against property are generally the same as those required for a home loan. However, additional documents, such as income tax returns and bank statements, may be required.
- Be aware of the other benefits and services your lender offers: Some lenders offer other benefits and services, such as personal accident insurance cover, free credit card, etc. It is important to be aware of these before availing of a loan against property.
- Evaluate your needs: It is important to evaluate your needs before availing of a loan against property. This will help you choose the right loan amount and tenure.
6 Common Myths about Loan Against Property (LAP)
Here’s a list of entirely untrue myths but deemed to be true by the masses:
Myth #1 – A loan against property can only be pledged with residential property.
Myth #2 – A borrower cannot use a pledged property as collateral.
Myth #3 – You may borrow the full value of your property using this loan.
Myth #4 – The interest rate on loans against property is always higher.
Myth #5 – Only a high-income borrower can apply for LAP.
Myth #6 – A LAP can only be used for business purposes.
Things You Need to know before Applying for a Home loan?
Applying for a home loan can seem daunting, but it doesn’t have to be. You can apply for a home loan through a broker or directly from a financial institution. Moreover, the things you must know are:-
- Documents required: The documents required for a home loan are generally the same as those required for a loan against property. However, additional documents, such as income tax returns and bank statements, may be required.
- Evaluate your needs: It is important to evaluate your needs before availing of a home loan. This will help you choose the right loan amount and tenure.
- Be aware of the other benefits and services your lender offers: Some lenders offer other benefits and services, such as personal accident insurance coverage, free credit card, etc. It is important to be aware of these before availing of a home loan.
- Check your eligibility: The second thing you need to do is check your eligibility for the home loan. The criteria for this may vary from lender to lender, but generally, you should be above the age of 18 years and have a regular income.
- Compare the interest rate and lenders: It is significant to compare the interest rates and lenders before availing of a home loan. This will help you get the best deal possible.
5 Common Myths about Home loans
Just like loans against property, there are many wrongful tales being spread out about home loans. The ones listed below are untrue:
Myth #1- Mortgage interest rates are at an all-time high
Myth #2- A borrower cannot use a pledged property as collateral.
Myth #3- Only first-time home buyers can get a good mortgage deal
Myth #4- The interest rate on home loans is always higher than on other types of loans.
Myth #5- You can’t get a mortgage if you’re self-employed.
You can also read: How to Qualify for a Mortgage in the UAE?
How Emortgage can Help You with Your Loan?
eMortgage is a leading mortgage firm that provides the best mortgage services to its customers. We have a team of highly qualified and experienced mortgage consultants who work closely with our clients to find them the best deals.
We offer a wide range of mortgage products like home loans, refinance loans, commercial loans, etc., that cater to the specific needs of our clients. We are known for our fast, efficient services and the lowest interest rates. We have a track record of providing the best deals to our clients.
eMortgage is a name you can trust when it comes to getting the best mortgage deals.
Conclusion:
Home loans and Loan Against Property are two of the most common types of loans. While both loans have benefits, it is important to understand which is right for you. If you are still unsure after reading this article, please do not hesitate to contact us, and we will be happy to help you find the best loan for your needs.
FAQ's
A home loan is a loan that a financial institution gives to individuals who wish to purchase a house. The loan is secured by the house itself, which means that if the borrower defaults on the loan, the lender can seize the property.
A loan against property is a loan that a financial institution gives to individuals who wish to use their property as collateral. The loan is secured by the property itself, which means that if the borrower defaults on the loan, the lender can seize the property.
The main difference between a home loan and a loan against property is that a home loan is given to purchase a house, while a loan against property can be given for any purpose. Additionally, a home loan is usually given at a lower interest rate than a loan against property.
Some of the benefits of a loan against property include the fact that it can be used for any purpose, it usually has a lower interest rate than other loans, and it can be used as collateral for another loan.
What are the risks of a loan against property?
Some of the risks of a loan against property include the fact that if you default on the loan, the lender can seize your property. Additionally, if the value of your property decreases, you may owe more than the property is worth.
You can get a loan against property by contacting a financial institution and asking about their loan against property program. You will typically need to provide the lender with information about your income, employment, and credit history.
