In What Ways is a Loan Against Property Different from a Home Loan

One can apply for a loan to meet an array of monetary needs. However, due to the availability of different types of loans, prospective borrowers often get confused about the better option. One of the most apparent confusions lies between a loan against property and a home loan. But, prospective borrowers must know that there are substantial differences between LAPs and housing loans; hence, it is important to learn about it before opting for credit. 

Differences Between Loan Against Property and Home Loan 

The primary differences between these two types of loans are –

1. Loan disbursement process

The first point of difference between LAPs and housing loans is in the loan disbursement process. In case of housing credits, borrowers mortgage a property to get the necessary funds to purchase it. Whereas, in case of LAPs, one uses the property he/she owns to avail of necessary funds.

2. Usage 

In case of housing loans, lenders transfer the credit amount directly to the account of a builder or a property seller. Hence, a home loan can only be used to purchase and construct a house. But, for a loan against property, an applicant directly receives the fund. Hence, it can be used for a legion of things such as education, holiday, wedding, business, and several others. Thus, before application, know about different types of loans against property to avail considerable benefits.

3. Loan-to-value ratio

The LTV ratio for home loans and LAPs are different. In case of a housing loan, one can get up to 90% of a property’s market value as a credit, whereas, for a LAP, this ratio remains around 60% to 70% of a property’s market value.

4. Tenor 

For both types of loans, lending institutions provide a lengthy repayment tenor. However, typically for a home loan, the tenor is longer in comparison to a loan against property.  

5. Interest rate

Although the interest rate of any loan type depends on multiple factors, the loan against property interest rate is usually higher than a housing loan. This is because the Government of India has always emphasised on making housing affordable to most individuals. Thus, leading financial institutions always try to margin the requirements for a housing loan. 

6. Tax benefits   

Borrowers for a home loan and a loan against property are eligible to get multiple tax benefits. However, a loan against property tax benefits is not similar to that of a home loan.

For example, for a loan against property foxbusiness individuals can avail of tax benefits on interest paid under Section 37 and Section 24. In contrast, Section 80C, Section 80EE and Section 24 are applicable for a home loan.  

Anyhow, before applying for a LAP, most lenders advise using the loan against property EMI calculator, as knowing repayment details beforehand can help in the monetary planning.

Benefits of using a Loan Against Property EMI Calculator

A few benefits of using a loan against property EMI calculator are – 

1. Provides fast results 

Calculating an EMI manually can be time-consuming. However, the process becomes exceedingly fast and easy with a LAP EMI calculator. Thus, this calculator can save time and increase overall productivity by providing accurate results every time. It can also help individuals to find accurate information while applying for a loan against property balance transfer. 

2. Provides amortisation schedule 

Besides faster results, this calculator also gives access to an amortisation schedule. This schedule provides a detailed financial breakup on how the payment proceeds through the tenor. 

3.   Helps select tenor

EMI of a loan depends on multiple factors, including tenor. Prospective borrowers can select an ideal repayment period for their LAP using this online device. However, they must know that a tenor is directly proportional to EMIs, which means a longer tenor will fetch a lower EMI. But, opting for a longer tenor usually makes a borrower pay more EMIs, increasing the total borrowing cost.

Read Also: Know About the Tax Benefits of a House Renovation Loan

Besides using an online calculator to make an informed borrowing decision, one can also opt for lenders that extend pre-approved offers. These offers streamline the loan application process and save time. They are available on various financial products like housing loans, LAPs, etc. Prospective applicants can check their pre-approved offers by entering their essential contact information.

Hence, before availing of a loan, know the differences between a loan against property and a home loan to select the ideal one based on preferences.