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Comparison between Loan Against Property and Personal Loan

Comparison Between Loan Against Property and Personal Loan

Though we may save for a rainy day, for any big or immediate investment most of us prefer the banks and NBFCs. Personal loans and Loan against property (LAP) are two popular choices for credits. One should choose carefully and check loans online for that.

Loan Against Property

In simple terms, LAP is a secured loan facility where the lender lends you the money keeping your property as a collateral until the entire loan is repaid. It is considered an easy and cheaper loan after home loans. The funds can be used for any purpose like expanding your business, medical emergency, marriage, house renovation, etc.

Personal Loan

Whereas a personal loan is an unsecured loan where the borrower do not pledge any security for obtaining a loan. The funds can be used for various purposes as per requirement.

Loan Against Property Vs Personal Loan

When one has to take a loan, a careful study is required to choose the best and most suitable one that saves you a lot and also suit your requirement. Various factors should be checked and we can compare loans online.

Loan Amount

Loan against property (LAP) is a secured loan, where one can get a higher loan amount, sometimes as high as up to 70% of the value of the property. If you require a large amount, this could be a convenient option to get a lump sum.

A Personal loan is an unsecured loan, where the loan amount is usually limited. The amount of loan given is determined on your income and repaying ability.

Loan Tenure

Along with higher loan amount for the Loan against property, one can also avail longer tenure period. It can be up to 15 years. But along with a  longer tenure there will also be high out go on interest.

Whereas for a personal loan, the tenure can be up to 5 years and it is sensible to quickly close the loan.

Interest Rate

The interest rate on Loan against property is much lower in comparison to the Personal loan. The interest rate on Loan against property as ranges between 11% to 16% while for Personal loan it may go to as high as 24%. This difference in interest rates is because of the risk factor involved for a Personal loan. The interest rate on the loan is fixed on the basis of the credit score, the income, employment and also the location.

Loan Processing

For loan processing, the Personal loan scores over loan against property. In personal loan, the processing is quick and loans are handed out as soon as it is approved by the lender. Here the income, credit score and repaying ability are the major criteria for loan processing.

While for a Loan against property, an elaborate study and evaluation of the property to be kept as collateral has to be done to secure the loan. There are internal checks, legal checks and evaluation of the value of the property, which might take a while and the loan can be processed only after a month.

Credit Score

A personal loan can get you high credit score as it is an unsecured loan with high interest rate as compared to loan against property. While for loan against property, the lender has the advantage of your collateral and interest rates are lower than the personal loan, so comparatively a loan against property will get you a lower credit score.

But if the tenure of  loan against property is longer then it can gain you a better credit score. However, one has to be consistent with the repayment to maintain a good credit score.

So Which of the Two is Better?

Well the choice depends on your requirement either a quicker loan or a large amount. If the funds needed is for immediate requirement such as medical treatment, then a personal loan could be a good option as it can be handed out within 3 days after application.

But for a low interest rate, longer tenure and higher loan amount, a loan against property would be a better and preferred option.


Credit Score    Home Loan    Loan Against Property    balance-transfer    Business Loan    Personal Loan



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