Your Ultimate Guide to Business Loans in India
December 26, 2023
Author: BBBInsider
Life is full of uncertainties, and often, responsibilities come knocking. Whether you’re gearing up for funding your child’s education, planning home renovations, or envisioning business expansion, a loved one’s wedding, having access to ready funds is crucial. In India, various lending institutions offer different types of loans tailored to your needs and circumstances.
Amidst the plethora of loan options, one might ponder on the best fit for their financial needs. This article delves into two widely sought-after loans: Loan Against Property (LAP) and Personal Loans.
Understanding Loan Against Property (LAP) and Personal Loan
Defining Loan Against Property (LAP)
LAP is a secured loan where the lender holds the borrower’s property as collateral until the entire loan amount is repaid. This property can be a residential or commercial building, and the funds can be utilized for business expansion, medical emergencies, house renovations, or for funding college education for the children etc.
Defining Personal Loan
In other words, What is a Personal Loan and How It Works
In the realm of finance, a Personal Loan is your versatile companion, adaptable for various purposes such as consolidating debt, financing significant purchases, or tackling unexpected expenses. Unlike secured loans, no collateral is required, borrower doesn’t need to pledge any security. Instead, the lender assesses the borrower’s credentials, including credit score and monthly income, before approving the loan. Personal Loans can fund a range of needs, from a holiday to buying gadgets, covering wedding expenses, or financing children’s education. Dive into this section to grasp the nitty-gritty of unsecured loans and their impact on your financial journey.
Distinguishing Features: Loan Amount, Interest Rates, and Loan Tenure
Loan Amount
LAP, being a secured loan, allows borrowers to access a significantly higher amount compared to Personal Loans, contingent on the property’s value. LAP typically permits borrowing up to 70% of the property’s value. In contrast, Personal Loan amounts are limited, based on the borrower’s income and repayment capacity.
Interest Rates
Interest rates for LAP are generally lower (ranging from 9% to 14%) due to the reduced risk for the lender. In contrast, Personal Loans carry higher interest rates as they are unsecured, increasing the lender’s risk. Interest Rates on Personal Loans in India, ranging from 10.99% to 24%. Compare the associated charges, including processing fees, prepayment penalties, and late payment fees.
Loan Tenure
LAP offers longer repayment periods, potentially extending up to 20 years. However, longer tenures result in higher interest payments. Personal Loans usually come with a maximum repayment period of five years, making them ideal for smaller loans.
Loan Processing
While Personal Loans have the edge in processing speed, with funds disbursed almost immediately after approval, LAP involves a more meticulous analysis of the pledged property. This includes internal checks, legal assessments, and property value evaluations, taking up to a month for approval.
Comparing Different Types: Personal Loans and Loan Against Property
Different Types of Personal Loans
Explore the versatility of Personal Loans, which are unsecured and offer repayment periods of up to five years. They cater to specific needs, such as:
- Personal Loans for Medical Emergencies
- Personal Loans for Travel
- Personal Loans for Weddings
- Personal Loans for Home Renovation
- Personal Loans for Education
Different Types of Loan Against Property (LAP)
LAP, being secured, provides financial support for various purposes, including:
- Commercial Loan Against Property
- Residential Loan Against Property
- Industrial Loan Against Property
Choosing Between Loan Against Property and Personal Loan
In the eternal debate of Loan Against Property or Personal Loan, the choice boils down to individual needs. If you require quick funds during emergencies and a swift disbursement, a Personal Loan might be the answer, especially for smaller amounts. However, if you’re looking for a lower interest rate, a longer tenure, and a higher loan amount, Loan Against Property emerges as the preferred choice.
Conclusion
Both Personal Loans and Loan Against Property have their merits. Personal Loans offer quick access to funds during emergencies, while Loan Against Property provides higher loan amounts. The choice ultimately rests on individual financial requirements.
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