Personal Loan or Loan Against Property
In this article, we will understand which loan is better Personal loan or a loan against property. To have a clear view we must know that what is a personal loan and what is a loan against property
Personal loan: This is a type of unsecured loan where the funds can be used as per the borrowers wish, and the loan can be availed easily and with simple documentation. This loan can be availed in order to fulfil your financial and personal needs these needs include:
- Renovation of property
Loan against property: As the name suggests it is a secured loan where the loan will be given to the borrower and the property will be kept as a security with the bank. This is the cheapest loan after home loan and in loan against property the person can use the funds as per his/her wish which may include:
- Expanding your business
- House renovation
- Medical emergency
We can compare which is better on factors like:
Loan amount: The loan against the property is a secured loan so the loan amount can be higher in the loan amount. Mostly up to 70%. The value of the property is provided as the loan amount. Whereas in case of personal loan is an unsecured loan so the loan amount is minimum. This depends on the income of the applicant and the repaying capacity.
Interest rate: The interest rate in the case of a loan against property is a bit lower it ranges from 11% to 16%. The interest rate can be higher in the case of personal loans and can be as high as 24%. It also depends upon your credit score, income, employment and location too.
Tenure: The tenure in case of loan against property is a long as the loan amount is also higher. The tenure can be up to 15 years. But the tenure in the personal loan is 5 years you can personal loan if you wish to close the loan soon.
Credit Score: The credit score is higher in personal loans as it is an unsecured loan with a high interest rate. In case of a loan against property, the lender has the advantage of the property which is kept as the security with the lender. The interest rate is lower so the credit score is also lower in the case of loan against property and the tenure on loan against property is longer so this might help the borrower to have a better credit score.