Comparison Between Home Loan Vs Loan Against Property

People require loans for obtaining liquid funds and other reasons. Due to the availability of many loans, people might get confused easily. It can be a bit of a struggle to figure out which loan would be ideal for them. Individuals often get confused between a loan against property and a house loan. In simple terms, a home or a housing loan is taken to purchase a house or to acquire liquid funds for the construction of a house. On the other hand, a loan against property is taken to fulfill other monetary needs while keeping the existing house as security. 

Often the terms housing loan and loan against property are used interchangeably. However, there’s quite a difference between the terms and types of loans. In this blog, we’ll compare a home loan with a loan against property and analyse them.  

Home Loan

A home or a housing loan is a type of secured loan. Individuals can avail of a housing loan to purchase a new property or house or to acquire funds to facilitate the construction of a new home. You can also use a housing loan to purchase a ready-to-move-in property. To better understand home loans, let us compare home loans with loans against property. 

Loan Against Property

A loan against property is a type of mortgage loan. It differs from a housing loan because you use your residential place as security to avail liquid funds for financial needs. You can take out a loan against property on your residential or commercial property for any personal or business use. To better understand a loan against property, it would be ideal to compare a home loan with a loan against property by noting the similarities and differences separately. 

Home Loan Vs. Loan Against Property

Understanding the similarities and differences between a housing loan and a loan against property will help you understand which type of loan will be ideal for you and when you need to take it out. 

Similarities: 

First, let us try to look at how similar loans against property and housing loans are. 

• The documentation and approval procedure for both these loans tends to be lengthy and time-consuming.
• On both loans against property and home loans, there is a top-up and balance transfer facility that lenders offer. 
• A 1% processing fee is imposed on both housing loans and loans against property.

Differences: 

Now, let us compare a home loan and a loan against property and analyse the key differences between them. 

• Interest Rates – Loans against a property usually have higher rates than home loans. You can easily compare home loan interest rates with a loan against property by looking at the various interest rates offered by different banks. 
• Exempting Taxes – Under Section 24 and 80 C of the Income Tax Act, you can avail of home loan tax benefits on both the interest payments and the principal amount. There are no tax benefits available for a loan against property. 
• The Amount of the Loan – You must acquire considerable money to buy your own house. Depending on the location and type of the property, you can avail yourself of around 90% of the property’s value for a home loan. Through a loan against property, you’ll generally be able to avail about 70-80% of the property’s value. 
• The Tenure of the Loan – Both the loans provide a long repayment tenure. However, the repayment tenure for a home loan tends to be more, 30 years than that of a loan against property, 20 years. 

Conclusion 

Therefore, after you compare home loans and loans against property, you will gain a better insight into which type of loan would suit you the best. After that, you can choose a loan that fulfills your financial requirements.