Loan Against Property vs Personal Loan

22 Sep 2021 6 min read
Personal Loan: Loan Against Property vs Personal Loan - Afinoz

What is Loan Against Property (LAP)?  

As the name implies, the loan is secured by the property in this scenario. To secure the loan, the property, which can be residential, commercial, or a plot, is utilized as collateral. This loan's proceeds can be used for anything. 

What is Personal Loan (PL)?  

A personal loan is an unsecured loan that can be obtained for personal purposes from any financial institution or lender. Similar to a loan against property, the cash can be utilized for any purpose. 

At some point in time, it may be the situation where the user needs to the dire need of cash. The purpose can be anything whether starting from emergency medical expenses to higher education. It helps to meet those financial requirements, it might have many options at disposals. However, there are two main sought-after paths are taking a loan against property and a personal loan. In this blog, we discuss these two and examine which one is better, based on certain key parameters for availing a personal loan and loan against property.  

Now, get a brief description of Personal Loan and Loan Against Property with certain factors, eligibility check, and interest rates offered.  

Factors affecting Loan Against Property and Personal Loan  

The following is the table that aforementioned the factors affecting Loan Against Property and Personal Loan:  


Loan Against Property 

Personal Loan 

Interest Rate 

Low-interest rates offered from 11%-16% per annum 

It offers high-interest rates; 11%-24% per annum 

Loan Quantum 

It depends on the market value of the property; 40%-70% of the property’s value.  

It depends on the monthly income, credit score, and the ability to repay the loan 

Loan Tenure 

Min. 10 years and Max. 15 years, depending on the bank 

Min. 1 year and Max. 5 years 

Processing Time 

It has long processing time since property-related documents are to be verified 

It has a short processing time is short since no collateral is needed 


EMI of the loan is significantly low, owing to low-interest rates 

EMI of the loan is high since the interest rates are high.  

How Personal Loan is different from Loan Against Property? 

When it comes to certain crucial characteristics that one considers when applying for a loan, the two types of loans are radically different. These parameters are decisive variables, and they should assist you in determining which of the two possibilities is most realistic in your situation. 

  • Interest Rates: When it comes to taking out a loan, the first thing considered is the interest rate. 

Because a loan against property is a secured loan, the interest rates charged are lower than those charged on personal loans. The interest rate on a LAP might range from 11 percent to 16 percent every year. 

However, because no collateral is required to obtain a personal loan, the interest rates are typically high, starting from 11% up to 24% per year. As a result, in terms of interest rates, a loan against property is a better option than a personal loan. 

  • Monthly Installments Calculated (EMI):  If the interest rate is high, the EMI amount to be paid is also high. As a result, personal loan EMIs are substantially greater than those associated with a loan secured by real estate. 

  • Term of the Loan:  If you take out a loan against your home, you can return it over a 5- to 15-year term, depending on the bank and other conditions. This is a viable option, especially if the loan amount is substantial. You should keep in mind that you will end up paying more in interest.  

A personal loan, on the other hand, has a maximum repayment duration of 5 years. This is ideal if the loan balance to be repaid is not too large. 

  • Loan Quantity:  When it comes to a loan against property, the loan amount will be between 40% and 70% of the value of the collateral. If you require a higher sum, this is the option for you. Depending on the value of the property, the loan amount can be in crores. 

In the case of a personal loan, the loan amount is largely determined by your monthly income, as well as other considerations such as credit score, age, and so on. The personal loan will be approved based on your ability to repay the amount. As a result, the loan amount in this circumstance is highly subjective. Nonetheless, the upper limit here might be anything from Rs.10 to Rs.15 lakh. 

  • Time to process the loan  

A personal loan, as previously stated, is an unsecured loan. Lenders will not require any collateral from you, resulting in a rapid processing time. All they'll do is assess your monthly income and credit score, which might result in your loan application being accepted in as little as a week.  

If you are taking a loan against your home, though, the approval time could be anything from 15 to 30 days. This is because, before releasing the loan funds, the lender will verify the legitimacy of the property-related paperwork. If the property has multiple owners, everyone must sign a no-objection certificate before the loan may be authorized. You may also be required to present proof of income for your loan repayment ability to be assessed.  

  • Failure to Pay Back the Loan 

If you don't pay back the loan that you took out against your home, you risk losing the asset that you used as collateral. As a result, think carefully before taking out this form of loan. 

In the case of a personal loan, failure to repay will result in an increase in the amount of interest that must be paid. It may also have an impact on your credit score


As you can see, both a personal loan and a loan against property have their own set of advantages and disadvantages. If you require a little sum of money quickly, a personal loan is the best option. If you require a substantial sum of money, you should consider taking out a loan against your home from However, the loan will take some time to be granted in this scenario. 

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