Three ways in which loan against property is better than Personal Loans

by Litty Jose Finance Analyst

Taking a loan against property in case of emergencies is an age-old practice. Property is a generally our biggest asset and even in ancient times people would keep their property or land as collateral when they borrowed money. The system of mortgage loan existed long before banks did. Even today property is said to be the best investment and people have often used their own homes as collateral or as a mortgage. Many prefer loan against property because this way you can get a higher loan amount with the benefit of lower EMI as you can get a longer tenure.

Recently, Crisil said in a note that the amount of mortgage loans is set to double to Rs.5 trillion by 2019 and it is expected that the number will grow by 22% annually in the next four years. There are also emerging signs of a build-up in risk as competition intensifies, Crisil noted.

When you get a mortgage loan you don’t necessarily have to disclose what you will be spending your money on. You can use it for medical expenses, education, travel or for a new business. This makes mortgage loans very similar to personal loans. Hence, there is a constant debate as to which one is a better option when you need a loan.

If you’re conflicted between whether you should opt for a loan against property or go for a personal loan instead, let us tell you why a loan against property is better for you.

1.  Lower interest rates: Mortgage interest rates are way lower than those of personal loans. This is because in a personal loan you do not have collateral with the bank. The difference between the interest rates can rage anywhere from 4% to 5%, which can mean a lot of savings.

2.  Longer tenure: The tenure for a loan against property is also much longer than that of a personal loan. Personal loans are offered for a period of less than 5 years whereas loan against properties are high-value secured loans that can be paid off in up to 10 to 15 years.

3.  Higher loan amount: You can get a higher loan amount sanctioned against your property than you might get if you got for a personal loan. Since you’re keeping your own property as collateral banks will offer you a higher amount. The amount will be based on the valuation of your property. Also, the loan against property eligibility criteria is lower than personal loan eligibility criteria.

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About Litty Jose Advanced   Finance Analyst

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Joined APSense since, August 2nd, 2016, From Mumbai, India.

Created on Feb 23rd 2018 01:22. Viewed 672 times.


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