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Loan against Property or Home Loan

Should you opt for a loan against property or home loan

Apnaloan.com Research Bureau

26 May 2008

  • A loan against property is given against an existing property of the customer while a normal home loan is a loan given for the purchase of a property.
  • In a loan against property, the end use is not monitored and you can utilize these funds to meet any of your financial requirements. Whereas in a normal home loan, the end use of the loan amount is monitored to ensure that the loan is actually used to pay the seller of the property.
  • The interest rates on loan against property are higher than rates on home loans because the purpose, for which the loan has been utilized, is not monitored by the bank.
  • In a regular home loan, the agreement value of the property is taken as a benchmark. In a loan against property, the finance is against an existing property, and hence the property needs to be valued by an approved valuer. Therefore, the loan is based on current market value.
  • The maximum tenure for which you can get a home loan is longer compared to that of loan against property. For home loans its 25 years whereas its only 15 years incase of loan against property.