3 Reasons Why a Loan against Property (LAP) Is Better than a Personal Loan

There are many reasons wherein you might think of getting a personal loan. It could be to finance your child’s marriage expenses or to cover unplanned medical expenses and even to expand your business. In such cases, you might require funds in an urgent manner and turn to a personal loan for financial assistance. However, taking a loan against your property is another useful options and this article will explain why such a loan is better than opting for a personal loan. 

Before We Begin, Let’s Understand What A Loan Against Property Is

It is a secured loan that is given to you against the mortgage of your property. The property being mortgaged can be a residential property where you live or that’s rented, it can also be a commercial property or a piece of land that you own. Now let’s discuss why Loan against Property (LAP) is a better option than a personal loan.

Firstly, The Interest Rate Is Much Lower Than A Personal Loan

Interest rates are very important factor when it comes to borrowing money. This expense can often bring havoc on your repayment plans and cause you to pull your hair out at the end of every month. When you opt for a personal loan, you could be staring down the barrel of an interest rate as high as 24%. That’s huge and it can strain your financial capabilities to the limit. However, if you opt for a LAP, you can expect an interest rate between 11 and 16%.

Get More With A Loan Against Property

The amount of money you get with a personal loan is often decided on your monthly income, credit score and other factors that determine your loan worthiness. Keeping in mind all of this, the upper limits of most personal loans is in the ballpark of around 15 to 20 lakh. However, if you opt for a LAP, you can avail as much as 40 to 70 percent of your property’s value as the loan amount, this can go up to several crores of rupees.

Loan Against Property Put Time On Your Side

The more time you have to repay the loan, the easier it is to budget your repayment plans. You can avail smaller EMIs while you look for ways to prepay the loan. With a personal loan, the tenure is normally around 5 to 7 years. This means you have a shorter window to repay the loan. However, with a LAP you have the freedom to choose tenures as high as 15 years. This way you can comfortably make smaller payments. Over 15 years, you may also receive several increments, bonuses and windfall gains that can help you prepay the loan and get debt-free sooner.

It’s for these simple reasons that a loan against property can prove to be a better financial instrument than a personal loan. Armed with this knowledge and depending on your needs, you can now make a better informed decision between the two.


loan against property , loan against home

Mozam Khan

I am a financial blogger since 2005, I am currently Working at All About Loan India as financial blogger, I love to share blog or article on Home Loan Plan and Policy, Mortgage Loan and Interest Rates on housing loan.

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