Personal Loan or Loan Against Property? - Personal Loan Blog - Tata Capital

Which Is Ideal For Your Needs - Personal Loan Or Loan Against Property?

Feb 28, 2017

Even if you are very smart with money matters, there may be times when your finances are strained and you might need a little help to get over your fund needs. Though the first source of financial help can be family and friends, the fact is that even they cannot help in case the required amount is large. In such cases, taking a loan is the most obvious choice.

But when you have decided to take a loan, the next question is about which type of loan should you take. The first option that comes to mind is of Personal Loan. But problem here is that the personal loan interest ratesare very high - often to the tune of 16% and above. There is another option for those who have a property in their name. This option is to take a loan against existing property. The best part about loan against property is that they have lower interest rates (12% to 15%) and have longer repayment tenures. Apart from this basic difference, few other factors decide whether you should take personal loans or go for loans against property.

One very important factor is the amount of money required. If money required is more than Rs 25 lacs, then personal loans might not help. Personal loans are generally given for smaller ticket sizes and even the banks are unwilling to give high loan amounts due to unsecured nature of these loans. In such cases, loan against collateral (property) is your best bet.

Another deciding factor is the urgency of fund requirement. Generally, personal loans are processed quickly and disbursed within a few days. Loan against property on other hand requires the applicant to provide all original documentary proofs and approvals. The processing time is typically longer as legal team of the bank has to physically verify and establish the property ownership. So in case of very urgent needs, personal loans might be a better choice.

The tenure you are willing to repay this loan in will also decide the type of loan you take. Personal loans are offered for a period of 6 years or less whereas loan against properties are high-value secured loans that can be paid off in upto 10 to 15 years. But its worth noting that it also means that the longer you borrow more interest you will have to pay.

So make sure that you have objectively assessed your financial needs before deciding on which loans to avail for your fund requirements. Also, these days many online emi calculators for personal loan are available. It might be worth a try to use such tools to see the impact of changing interest rates on EMIs.