How is Loan Against Property different from Home Loan?

There are times when Loan Against Property (LAP) is considered as a type of Home Loan (HL). However, both of them are two different kind of loans.

In case of Loan Against Property, you pledge your property to meet your personal or business goals. Loan Against Property belongs to the secured loan category where the borrower gives a guarantee by using his property as security.

On the contrary, you borrow a sum of money from a financial institution or bank for purchasing a home.

There are a lot of other differences between both the categories of loans. Let us understand this by having a detailed comparison as follows:

  1. LAP has a maximum tenure of 15 years, whereas, HL has a maximum tenure of 25 years.
  2. LAP is availed against collateral i.e. The borrower gives a guarantee by using his property as security. On the other hand, HL is availed for the purchase of a house.
  3. LAP can be used for both – personal & business needs, but HL does not give you the benefit of using cash for any needs.
  4. LAP is majorly availed by self-employed people. It is very rare that a salaried person would want to avail such kind of loan. Whereas, HL is availed by both self-employed & salaried people.
  5. In LAP, loan amount up to 70% of the property valuation can be availed. But, in case of HL, loan amount up to 80% of the property valuation can be availed.
  6. In LAP, if the main applicant is a lady, there is no rebate on ROI. Whereas, in HL, if the main applicant is a lady, there is a rebate on ROI i.e. the ROI will be low as compared to the one with male applicant.
  7. In LAP, there is no tax benefit, but in case of HL, there is a tax benefit.

A tabular difference will enhance our understanding of the different categories of loans:

LOAN AGAINST PROPERTY

HOME LOAN

LAP has a maximum tenure of 15 years HL has a maximum tenure of 25 years
This type of loan is availed against collateral i.e. property This type of loan is availed for purchase of house
LAP can be used for business or personal needs HL does not give you the benefit of using cash for any needs
LAP is majorly availed by self-employed people HL is availed by both – self-employed & salaried people
Loan amount up to 70% of the property valuation can be availed Loan amount up to 80% of the property valuation can be availed
There is no rebate on ROI, if the applicant is a lady There is a rebate of on ROI, if the applicant is a lady
There is no tax benefit in availing LAP There is a tax benefit in availing HL

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By | 2018-04-17T11:26:36+00:00 April 16th, 2018|Blog|
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