Loan Against Property Vs Home Loan - Know The Difference

A loan against property is precisely what the name says, and it is a loan taken against collateral. In most cases, the guarantee is land, your home, office, or even against machinery or infrastructure. Home loans are given against the purchase of homes or renovation purposes only. In both cases, the lender holds the property documents. The tenure f a home loan is typically much longer than a mortgage loan.

A home loan is easier to avail, and the lending rates are low. You pay an EMI till the loan is cleared to get total rights to the property. The mortgage loan or the loan against property is placing a pre-owned property as collateral. The loan against property interest rates is often higher as the mortgage is perceived as leverage. The processing charges are also usually much higher in a mortgage loan. Home loans do not carry a foreclosure charge, but mortgages do. The foreclosure charge may vary from bank to bank.

There are tax deductions available on home loans, but no such facility is available for mortgage loans. The government encourages the motto that all Indians should own their own house. The tax deductions are on the interest paid on the loans.

The home loan is given to the home buyer to purchase a house, whereas the proceeds of a loan against property can be used for multiple purposes. The repayment capacity of the loanee is essential in both cases. In both cases, the lender will ascertain whether the loanee is eligible for the same.

Additional Read: What are the Benefits of Taking a Loan Against Property?