Credit options like loan against property and home loans have always been the go-to options when in need of substantial financial assistance. Since both loan options have their share of pros and cons, individuals are often confused when it comes to selecting between any particular one of them.
To gauge the better option between a loan against property and a home loan, prospective borrowers must make it a point to weigh their differences.
The following differences are deemed helpful while deciding the better credit option out of the two, i.e. loan against property vs home loan –
- Rate Of Interest – The rate of interest charged on home loans is lesser than that on loan against property. The other charges of LAP may also vary from that of home loan depending on the lender’s policies.
- Tenure – In case of home loans, the tenure extends to 30 years and in the case of loan against property the term stretches up to 15 years.
- Loan To Value – Borrowers can avail up to 90% of their current property value as a home loan. On the other hand, in the case of loan against property, borrowers would receive up to 60% of their current property value as a credit.
- End-User – When it comes to home loans, borrowers are subjected to several end-user restrictions. Whereas, in the case of loan against property usage restrictions are relaxed. Home loan borrowers can use the credit to buy a house, a plot or an under-construction property only. Whereas, loan against property borrowers can use their credit to finance their commercial, industrial or personal requirements. It influences the debate of home loan vs loan against property to a great extent.
- Tax Exemption – Home loan borrowers can claim tax exemption on their interest and the principal amount under Section 24 and Section 80C respectively. While there are no tax exemptions on loan against property, they come with a comparatively low EMI.
Borrowers should also compare the process of documentation followed by both credit options to deduce whether loan against property vs home loan will be better suited for their financial requirements.
Additional Read: Essential Documents To Avail A Loan Against Property