Loans help in dealing with personal financial roadblocks. There are two types of loans, depending on the goal for which the loan is to taken.
A Home Loan is usually taken by prospective home seekers who want to pay for the construction of the property or buy a house or a plot. This is an unsecured loan option. A Loan Against Property allows borrowers to finance their needs.
These could be funding businesses, medical emergencies, etc. Since the property has to be mortgaged, this loan could also be called a mortgage loan against property. The sanctioned loan is based on the value of the property used as collateral.
Difference between Home Loans and Loan Against Property
Both of these loans differ on a variety of factors. These are:
Rate of Interest:
This is one of the most important factors to be taken into account while applying for loans. It is that proportion of the loan that the borrower pays as interest. Home Loans usually have a lesser rate of interest as compared to Loan Against Property.
As mentioned above, a Home Loan is used to finance the purchase of a property or construction. A Loan Against Property is taken for urgent financing needs like medical bills or leisurely expenditures like weddings. A Home Loan can never be taken for anything except property. A Loan Against Property can be used to fund a house, but a Home Loan cannot be used for anything else.
The tenure specifies the total amount of time for which the loan can be taken. A Home Loan can be taken for 30 years. A Loan against Property can only be taken for a maximum of 15 years.
A lot of time may elapse between the filing of the loan to it being sanctioned. Home Loans have a simple documentation process. Banks usually complete the process in a fortnight. A Loan Against Property takes time to sanction because of all the background checks and thorough property evaluation.
Loan to Value:
While sanctioning a Home Loan, a bank considers a lot of criteria. These include your level of income, job type, security when it comes to your job, etc. But for a Loan Against a Property, the only thing that is taken into consideration is the property’s value.
The Tax Scheme:
Under Section 80C of the Income Tax Act, you are eligible for a deduction of up to 1.5 lakh as tax savings on your principal amount. Benefits for a Loan Against Property are not as much. Under Section 24 of the Income Tax Act, tax benefits can be given to a Loan Against Property if used for a new house.
The decision to purchase property, whenever it is in your life, is not an easy one. It would help if you had a true financial friend in times like these. Finway can hold your hand and guide you to get the best loan from the company. Whether it’s a property mortgage loan or other financial solutions, you will be covered.