The financial terms related to home loans are often confusing to many applicants. There are lot of mixed information when it comes to two terms - "Home Loan" and "Loan against Property". They both have different features and benefits. Although the terms are used interchangeably but there is a lot of difference between the two,
Purpose:
Home Loans are availed to buy a new house, plot or purchase an under-construction property etc.
Loan Against Property can be used to mortgage your existing property in exchange for business or personal use
Interest Rates:
Home loan interest rates are typically lower compared to that of Loan Against Property.
Home Loan can be availed at as low as 8.70% onwards, whereas Loan Against Property is offered at minimum as 9.50% onwards.
Loan Tenure:
Home Loan can be availed upto maximum of 30 years, however Loan Against Property is provided for maximum upto 15 years.
Loan Amount:
Home Loan is offered maximum upto 90% of the property value and Loan against property is granted maximum upto 60% of the property value.
Tax Exemption:
Home loans are eligible for tax deduction under Section 80 C & Section 24, whereas in case of LAP benefits are basically dependent upon end usage.
Other Differences:
For Home Loans the processing is smooth as compared to Loan Against Property
The documentation process for Home Loan is simpler in comparison to that of Loan Against Property
LAP can be issued in any of the following scenario –
Business expansion
Marriage of child
Higher studies loan for children
Medical treatment fund
Vacation
Strict restriction and monitoring by bank on the money usage for home loan as compared to LAP where the borrower can utilize the some assured for any kind of personal, business or commercial usage ( as earlier mentioned in the documents).
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