Life is full of unexpected surprises. You can land in a position where you need financial backing at any point in your life. Availing a loan is a wise option in such a case. But the question arises, which is better in Personal Loan vs Loan Against property? 
What is a Personal Loan and Loan Against Property
Personal loan: A personal loan is an unsecured loan so, it does not require any collateral. You can apply for a personal loan if you need finance for any medical emergency, a vacation trip, marriage expenses, etc. and the loan will be sanctioned based on your profile and stability of income.
Loan against property: Loan against property is a type of secured loan and can be taken against the residential property or commercial property as collateral.
Here is a detailed comparison of Personal Loan vs Loan Against Property:
- Interest Rates: One of the most significant differences between the two types of loans is the rate of interest. The interest rates for a loan against property are 8.95% to 12% per annum. As it is a secured product, so rates are lower as compared to personal loans. Personal loan Interest Rates are from 10.50% to 13% per annum. So, if you are looking for a cheaper loan then go for a loan against property.
- Credit Score: A good CIBIL score is required for availing of personal loan. So, individuals with a poor CIBIL score may opt for a loan against property. In the case of a default, banks can take over the pledged property. A personal loan is only for good credit score holders. If you have a credit score of more than 750, only then you can take a personal loan.
- Processing Time: If you need instant money, always take a personal loan. The processing time of a personal loan is 2 to 3 days. Banks will verify your credit history, employment details, and personal details. But a loan against property can take more than 2 weeks to get disbursed. Banks need to carry out a detailed verification of the property papers and other necessary documents.
- Loan Tenure: The tenure of personal loans is from 1 to 5 years whereas the tenure of a loan against property is a maximum of 15 years.
- Loan Amount: In the case of a personal loan, the loan amount depends upon the stability of income and repayment capability. The maximum amount that you can get is Rs. 20 lakh. Loans against the property will consider the value of the property in the market. You can get a loan amount of 40 to 70% of the value of the property. If you need a high amount, then choose a loan against property. But, always analyze your repayment capacity before taking a loan.
After analyzing all the above differences and criteria, one must choose wisely between Personal Loan vs Loan against property. Personal loans are better if you are having a healthy and strong banking history and need instant finance. But if you are looking for cheaper interest rates and can wait for 1 to 2 weeks then you should choose a loan against property. Now, the choice is yours.
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Special Note: An individual must examine the whole EMI amount payable to the lender with the Personal loan EMI calculator.
