Have you ever gone through the drop-down menu of various kinds of loans available on the portal of a financial institution? You may find the usual suspects such as personal loan, auto loan, education loan, home loan etc. But look closer, and you will also find something called loan against property.
What’s loan against property, you may ask? And how is it different from the home loan?
We find out.
Purpose of the loan
Home loans and loan against property may sound the same, but they serve different purposes. The home loan is meant for acquisition/construction of a house.
The loan against property means that you take a loan against an existing property.
Home loans can be used only for the purpose that it is meant for, i.e., buying a home. The loan against property can be used for a variety of purposes like business expansion, education, meeting emergencies or even for buying a house. It can be availed as a lump sum amount or as a line of credit for a specified period.
The rate of interest
Home loans fall under the category of priority lending where the rate of interest is lesser. Currently, home loan interest rates are decided by the Marginal Cost of Funds-based Lending Rate (MCLR) and are in the range of 8.5-12% depending on the lender and the credit profile of the borrower.
Compared to this, the loan against property does not fall under any such category, hence the interest rate is higher and ranges between 10-15%.
Loan to value
To avail a home loan, a borrower needs to pay the margin money, which is also called the down payment. This is in the range of 10-30% depending on the bank and the credit profile of the borrower. However, as the loan against property is considered as a high ticket loan, the loan to value ratio is much lesser than that of a home loan. In case of loan against property, lenders retain a higher margin in the range of 25-40%.
Tenure of the loan
Both home loans, as well as loans against property, are long tenure loans. The maximum tenure for home loans can be 30 years, which again depends on your lender. But the maximum tenure for a loan against property is much lesser at 15 years.
Nice blog
I want to get Home Loan about 25 Lakh which has given a low interest rate
Thanks for this post. I need more details for how will calculate the interest amount?
Thanks for this post.How will you calculate the interest amount?
To calculate your EMI and Interest amount on any loan, we have a detailed guide on that. Please check the post-https://roofandfloor.thehindu.com/real-estate-blog/roofandfloor-emi-calculator-calculate-your-emis-in-just-3-steps/ or check the EMI calculator that is is available for all the projects listed on Roof and Floor. You can find it on the tab that has details about BHK configurations and the price.
Thanks for this post. I need more details about the rate of interest?
Thanks for this post.I need more details for Purpose of the loan?
Thanks for this post. I need more details for Loan to value?
Thanks for this post.I need more details for Purpose of the loan? and Tenure of the loan?
Thanks for the post.I need more details for the Tenure of the loan?
Nice post..Thanks for sharing your information
Good post. LAP is used mainly for business purposes.