Loan Against Property vs. Other Loans: Making an Informed Choice
Numerous experts recommend selecting a Loan Against Property as the optimal funding choice. In comparison to alternative loan products, Loan Against Property (LAP) features a flexible interest rate, lacks constraints on end-use, offers an extended repayment tenure, and encompasses various additional benefits.
It is advisable to conduct a thorough examination of information compiled on diverse loan products, including LAP, Home Loans, Personal Loans, and Gold Loans. Take the necessary time to carefully review each loan type and choose the one that aligns most effectively with your requirements.
Also Read: What is Loan Against Property? Features, Eligibility, Documents, and more
LOAN AGAINST PROPERTY
As previously stated, Loan Against Property stands out as the most favourable option but here are the key features that will help you identify and make an informed choice.
Loan Against Property Features
Property Ownership in Loan Against Property
If you choose a Loan Against Property, you still own the property you put up as collateral. The lender doesn't take ownership, so you can use the property as you want, as long as you make your regular EMI payments.
Loan Against Property Interest Rate
Since Loan Against Property is secured, it typically has lower interest rates compared to unsecured loans. Borrowers with a positive credit history and steady income can negotiate favorable interest rates.
Flexible Repayment Tenure of Loan Against Property
Loan Against Property is known for its flexible repayment options, allowing for extended tenures of up to 20 years. Certain lenders, like Godrej Finance, may even provide tenures as long as 25 years.
End Use of a Loan Against Property
Typically, borrowers have the freedom to use Loan Against Property funds without specific restrictions, as long as the purpose is legal and legitimate.
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Loan Against Property Eligibility
Also Read: A Comprehensive Guide to Loan Against Property
Other Loans
Home Loans
Home loans facilitate borrowers in realizing their homeownership aspirations. Given that homeownership is synonymous with personal success therefore, home loan is highly sought after in our country.
Home Loan Features
Income Tax Benefits
When you take a Home Loan, you can get some money back on your income taxes. You can reduce the amount of income you're taxed on by claiming deductions. For example, you can deduct stamp duty costs up to INR 1.5 lakh under Section 80C. Additionally, you can deduct up to INR 2 lakh on the interest under Section 24B, and up to INR 2 lakh under Sections 80EE and 80EEA. For the repayment of the loan amount itself, you can claim up to INR 1.5 lakh under Section 80C. These deductions help in reducing the overall amount of income on which you have to pay taxes, providing some financial benefits for those who have taken a Home Loan.
End Use
Did you know that a home loan isn't just for buying a new home? You can use it for other things too! If you want to buy a piece of land for building in the future or if you need money to fix up or improve your current home, you can also use a home loan for that. It's not just about getting a loan to buy a new house – there are different ways you can use a home loan to help with your housing needs, whether it's for construction, repairs, or making improvements to your existing home.
Home Loan Eligibility
Home Loan Eligibility for Salaried and Home Loan Eligibility for Self-Employed Individuals |
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Also Read: Buying a Home Together – A Tax Saving Instrument
Personal Loans
Personal loans are a helpful tool that you can use for anything you need. Just like with a Loan Against Property, you get all the money you need at once. Then, you can pay it back slowly over time with regular monthly payments. It's a flexible way to get the funds you require and manage the repayments in a way that suits your budget. You can also check your payable monthly EMI using an EMI calculator.
Personal Loan Features
Fast Loan Approval
To get a personal loan fast, you need to meet certain requirements. Having a good credit score is really helpful. The money is usually given to you within a day, but it depends on the bank or lender. So, if you're in a hurry, a personal loan can be your best choice during an urgent situation.
No Collateral Requirement
If you meet the requirements, you don't have to give anything valuable as security besides proof of your income. This means your important belongings are safe. A personal loan is considered the best choice when you need money quickly.
Personal Loan Flexibility
The amount of a personal loan depends on things like whether you've paid your bills on time, how much money you make each month, how old you are, what job you have, how well-known your employer is, and other similar things. Lenders can determine personal loan amounts starting from Rs. 10,000 up to Rs. 40 lakhs, depending on these factors.
End Use
Personal loans are often called 'all-purpose loans’. This means you can use the money for anything you need, like buying new furniture, appliances, going on a vacation, and more. However, it's important to know that you can't use the loan for things that are speculative or illegal. Stick to using it for your regular needs and plans.
Personal Loan Eligibility
Personal Loan Eligibility for Salaried and Personal Loan Eligibility for Self-Employed Individuals |
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Gold Loans
In India, many people use and value gold a lot. Because of this, owning gold can be a good thing and can be a financial tool for people who have it.
Gold Loan Features
Fast Processing
Getting a gold loan is fast because real gold is used as security. This makes it easy for banks and other lenders to provide gold loans. As a result, banks often approve gold loans in just a few hours.
Unique Repayment Options
With many gold loans, you can choose to pay only the interest without repaying the actual borrowed amount for a while. The gold loan interest rate is also attractive. You have the option to pay back the main borrowed amount later, towards the end of the payment period.
Anytime Liquidity
Gold loans are sometimes called "ATL," which stands for anytime liquidity. This means that, unlike other ways of getting money, you can apply for a loan in less than 30 minutes without doing a lot of paperwork.
End Use
Gold loans have no restrictions on how you can use the money. You can use it for anything, like funding a wedding or buying jewelry. However, using it for speculative or illegal purposes is prohibited.
Gold Loan Eligibility
Gold Loan Eligibility for Salaried and Gold Loan Eligibility for Self-Employed Individuals |
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RECAP
Loan Type |
LAP |
Home Loan |
Personal Loan |
Gold Loan |
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Now that you know about different types of loans, consider taking a closer look at Loan Against Property. It uses real estate as security, and you can get tax benefits on the interest you pay. For example, if you use the loan for repairs and insurance of machinery, plant, and furniture, you may qualify for benefits under Section 31 of the Income Tax Act. Additionally, if you take the loan to build a new home, you can get income tax benefits of up to INR 2 lakhs under Section 24 of the IT Act.
To sum it up, deciding between a Loan Against Property and other loans is about understanding your financial needs. While a Loan Against Property uses your property as security, it offers flexibility and potentially lower interest rates. It's great for substantial funding needs. Other loans, like personal loans, might have higher interest rates but no need for collateral. Consider your requirements, repayment capacity, and the purpose of the loan. If you own property and need a larger amount with favorable terms, a Loan Against Property could be a wise choice. Otherwise, explore other loans based on your specific financial situation and borrowing needs.
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Related FAQs –
Q.1. Can I use Loan Against Property for personal expenses?
Yes, you can. This type of loan as no end-usage restriction unless you need funds for gambling or illegal purposes.
Q.2. How to calculate monthly EMI on Loan Against Property?
Use an online Loan Against Property calculator to estimate your monthly EMIs easily.
Q.3. Can I start a new business with Loan Against Property?
Yes, you can start a new business by mortgaging your property for funds.
Q.4. How can I check my eligibility for Loan Against Property?
Use an online Loan Against Property eligibility calculator to determine your loan eligibility.
Q.5. What are the other types of loans for business if I don’t have a property to mortgage?
If you don’t have a property that you can offer as a collateral, there are unsecured types of loans such as Business Loan. Godrej Capital offers Business Loans for MSMEs and Business Loans for women to help you grow your business.
Disclaimer: The contents of this article are for information purposes only & not a financial advisory. For more details, please refer to the product or service document and/ or connect with our customer representative before making any financial decision. The information is subject to update, completion, revision, and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements. Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
