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Loan against property vs personal loan which is the Right option?

You might have planned something on your mind about getting the home renovated, sending your children  for higher studies abroad, may be financing your business  so as  to take it to the next level. For all this you need to be very strong in your personal finance or you need to make fiancé arrangement for all.


There are a number of ways for a person to arrange money to fulfill his dreams, one of them is taking a loan and repaying the same amount of the set time. You can apply for a personal loan or you can go for the loan against a property by pledging property as security.


What is a loan against property?


You can get the loan against the property at lower interest rate to fulfill your financial needs over the high-interest rate persona loan.

The loan eligibility is based on the value of the property and your source of income. This loan comes under the category of secured loan.

In LAP, lenders give the loan up to 40% to 60 % of property value that is certain percentage of property’s present market value

Loan against property can be taken for the following purposes


Business Expansion

Educational and marriage purposes

Buying Properties

Improvement of Existing properties

Medical Expenses

Any other personal needs

What kind of properties can I mortgage for a loan?


You can normally take a loan against your self-occupied or rented residential property. This could be a house or even a piece of land.

Eligibility criteria vary from one person to another person based on


Property Value

Your repayment capacity




Your income and any other loan obligations


Cost/value of the property mortgaged


Loan against property Interest rates:


Interest rates on loan against property ranges from 11.30% -12.80% and the loan tenure can be up to 15 years.

How is a loan against property different from a personal loan?


Loan against Property Personal Loan :


In loan against property, someone has to mortgage his property his house or flat whereas in Personal loan one can get a personal loan for any purpose without any security as guarantee or security.



In Mortgage loan interest rate is lower than that of personal loan.


In personal loan interest rate is high compared to mortgage loan, interest rate ranges from 16% to 21%


In LAP, Loan eligibility is determined by the value of the property and his or her income, whereas in personal loan eligibility is calculated by individual’s income and his credit score.


Upper limit Loan tenure is 5 years in Personal loan, whereas in LAP loan tenure is up to 15 years


What documents are required for applying for a loan against property?


Most banks and financial institutions typically require the following documents.
Know the list of document required for HDFC Bank, Axis Bank, ICICI Bank, CITI Bank

Generally, most of the financial institutions need following documents

Salaried Customers Self Employed Professionals Self Employed Businessman


Application forms with photograph

Identity and Residence Proof:

Education Qualifications Certificate and Proof of business existence

For salaried customers:

Identity and Residence Proof

Latest Salary-slips

Form 16

Last 6 months bank statements

Processing fee cheque

For the Self Employed Professionals:

Last 3 years Income Tax returns (self and business)

Last 3 years Profit /Loss and Balance Sheet

Last 6 months bank statements

Processing fee cheque

Loan against property is one of the easiest ways to get the money to meet your needs. The only negative aspect is

Lenders start possessing the mortgaged property upon the borrower fails to repay the borrowed sum

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Priya Rai is a loan consultant.