Property loans and home loans are commonly confused in their distinction. They don’t mean the same thing. It is important to learn the difference between these loans when applying for a home loan or property loan.

What is a Property Loan?A property loan, also called loan against property, is a type of loan to generate liquidity where the land is used as collateral to ensure that the loan is made secure.

What is a Home Loan?A home loan is the act for asking for funds from a financial organisation specifically to buy a home or a flat. When it comes to home loans, the relationship between the lender and borrower can last anywhere from 5 to 25 years where the borrower must repay the loan in a certain time period, called a loan tenure.

Differences between Home Loan and Loan Against Property
Do We Mortgage Property?A home loan is given to a borrower solely for the purpose of buying a home or property. The payment is generally made to the builder or seller of the property.

A loan against property in India is given as open end use and is given with the property as security. The payment in this case is made to the borrower. You could apply to financial organisations like Bajaj Finserv that provide loans against property with no foreclosure charges. In both the cases, the property is mortgaged to the lender.

Reasons to Take a Home Loan and Loan Against PropertyWhile the only purpose to take a home loan is to buy a home or property, a property loan can be availed for a variety of reasons:

  • To fund medical treatments
  • Higher studies
  • A wedding
  • Expanding your business
  • To go on a vacation

What is the Eligibility Criteria?

  • A good flow of income
  • Minimum work experience
  • Ensuring you have a good credit score
  • Producing documents of your assets and liabilities
  • Producing documents of your spouse’s salary if required

A property loan can be availed if and when you fulfil the following parameters:

  • Producing document for the cost value of your mortgaged home or property
  • Producing your credit history, i.e., payment of credit card debts, loans, etc.
  • Producing documents of your income
  • Producing documents of your assets and liabilities

Average Interest RatesThe interest rates are highly important when it comes to loans. Normally loan against property interest rates starts from 12%, and the loan tenure can go up to fifteen years.

Home loan interest rates can go from 9.5% to 16%, with a loan tenure of ten to twenty five years. You could apply for more beneficial loans with NBFCs like Bajaj Finserv that offer home loan interest rates as low as 9.5%.

The best way to earn some quick money is with a property loan. The only problem is if you are not able to pay off the debt, you will be penalised and the bank might end up taking possession of your property.

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