Is wedding expenditure on your mind, does the education of your children grab your maximum attention or are you seeking immediate solutions to deal with a medical emergency? You’ve got two options – personal loan and loan against property – to deal with these situations. However, as these are loans with obligations to pay Equated Monthly Instalments (EMIs) for a specific period, making an informed financial decision is critical. In this blog, we will compare personal loan vs loan against property and help you determine the right alternative for your needs. But before that, let’s define these two loans.
What is a Personal Loan?
A personal loan is a type of unsecured credit you can get from banks and non-banking financial companies (NBFCs) at varied interest rates. Both salaried and non-salaried are eligible for a personal loan provided they earn the required income, have a minimum work experience as stipulated by the lender, possess a strong credit history, etc.
What is a Loan Against Property?
A loan against property is a secured credit granted against the mortgage of the property. So, if you have a home in your name, you can have it as a collateral to access a loan against property. The loan will have interest rates based on the credit score, property value and other assessments.
Comparing Personal Loan vs Loan Against Property on Various Parameters
Figuring out the right loan alternative will depend firmly on your needs – the loan amount you seek, how quickly you want that, and what affordability do you have regarding repayments. Comparing personal loan vs loan against property based on these aspects is critical for selecting the right option. Let’s begin!
Processing Time
The processing time from personal loan application to disbursal can take 2-3 working days, provided you meet the eligibility criteria and submit all the required documents. In fact, in the case of pre-approved personal loans that are granted to individuals with a good credit history, the disbursal can be within an hour. It’s that quick!
However, when it comes to a loan against property, procedural formalities are way more. The mortgage process will require technical and legal evaluations of the property, which can take a couple of weeks to say the least. The approval for a loan against property also depends on report findings. In case the report indicates too many red flags, lenders can deny offering a loan against property.
So, if you seek funds immediately, opt for a personal loan.
Interest Rates on Personal Loan vs Loan Against Property
Assessing the interest rates helps decide the low-cost alternative. As personal loans are unsecured credits, they come at higher interest rates ranging from 12-25% per annum on average. Your personal loan EMIs will be based on these rates. Whereas a loan against property is granted at interest rates ranging from 10-13% per annum. From a cost standpoint, a loan against property is definitely the better option.
The Extent of Loan Amount Possible
Personal loans can be offered for up to 15-30 lakh, with a few lenders extending the limit to as high as INR 50 lakh. However, the actual loan disbursal amount will depend on your income, credit score and repayment potential. Ideally, lenders want the EMIs to not exceed 30-50% of one’s net monthly income.
A loan against property, on the other hand, is disbursed g to as high as INR 50 lakh. Whereas the amount for a loan against property depends on the value of the property as assessed by the legal and technical verification officers hired by the lenders. The loan amount would likely account for 70-90% of the property value. Since it’s a term loan like a personal loan, your income will also come into play while deciding the loan amount. See which of the two – personal loan vs loan against property – allows you to avail of enhanced loan amount at affordable terms to meet your needs.
Processing Fee in Personal Loan vs Loan Against Property
A processing fee is a vital component of personal loan charges. Lenders usually charge a processing fee of upto 2-3% of the personal loan amount plus GST. Whereas in the case of a loan against property, the processing fee can be around 0.75-1.50% of the loan amount plus GST.
The Role of Credit Score in Personal Loan vs Loan Against Property
A credit score is paramount in case of personal loan approvals. The credit score needs to be above 700 for a smooth personal loan approval. Whereas the credit score may not hold importance for loan against property approvals. However, a good credit score will fetch you lower interest rates.
Conclusion
Choosing from a personal loan vs loan against property will depend on your needs and budget. If your needs are instant, applying for the best personal loan at attractive interest rates will make sense. However, if you can wait, a custom loan against property at lower interest rates will be a better option. That’s all we have for you today. We at zarooribaathai.in will come with another exciting story soon. Till then, it’s goodbye!
