Housing Loan vs Loan Against Property: Which is Better?

Compare Home Loans with Property-Based Loans to See the Main Distinctions

Understanding the basic differences between the two loan options is important to choose the better finance that aligns with your needs. Housing loans and loans against property differ in many ways. These are the primary differences between the two financing options.

Loan Purpose

The purpose or usage of a loan is a basic factor that defines the nature of a loan. Housing loans are primarily used to purchase a home or to renovate an existing home. You can also purchase land with this financing to build a house. However, loans against property can be used for varied purposes such as financing a business, buying a car, medical emergency, debt consolidation, etc.

Difference in Interest Rates

Interest rate is a major concern when a person applies for a loan. Housing loan usually involves low interest rates as compared to loans against property. Housing loan borrower pays less interest due to support from government subsidies on housing loans. Loans against property have higher interest rates because of the broader usage and regulatory terms.

Eligibility Criteria

Housing loans and a loan against property have different eligibility criteria. To apply for a housing loan, you need to have a good credit score, proof of income and initial deposit. On the other hand, a borrower needs to provide a property appraisal report and proof of ownership to be eligible for a loan against property. The housing loan amount depends on the credit score and income of a borrower, while the loan against property amount depends on the property valuation.

Repayment Tenure

Repayment tenure is another essential factor to consider when choosing the best loan type. Housing loans generally have longer repayment tenures compared to loans against property. Repayment terms for housing loans can vary from three to thirty years. A loan secured by property may have a maximum repayment period of 15 years.

Taxation Benefits

Housing loan borrowers often enjoy tax relaxations because of several government schemes on housing loans. Several regulations also work in favour of housing loan borrowers. A loan against property is hardly covered under any tax benefit.