Which Loan is the Best? Loan Against Property vs Personal Loan? 

Which Loan is the Best? – Loan Against Property vs Personal Loan? 

While taking a loan, it’s essential to compare different types of loans to find one that best fits your financial needs. This blog post will explore the benefits of both loans against property and personal loans, guiding you toward an informed decision that aligns with your financial goals. 

What is a Loan Against Property?

A Loan Against Property (LAP) is a secured loan where the borrower uses a property as collateral. This property could be residential or commercial buildings or land. The secured nature of the loan typically results in more favourable loan terms, including lower interest rates and larger loan amounts, making it an attractive option for bigger financial needs. 

What is a Personal Loan?

A personal loan is an unsecured loan that does not require collateral. These loans are typically used for immediate financial needs like emergencies, minor home renovations, or weddings. However, they come with higher interest rates and shorter repayment terms due to their unsecured nature. 

Key Features of Loan Against Property 

Below are some of the key features of a loan against property: 

Loan Amounts and Terms: Loans against property allow you to borrow up to 70% of your property’s value, with terms extending up to 15-20 years. 

Interest Rates: Generally lower than those of personal loans, reflecting the lower risk due to the secure nature of the loan. 

Purpose: Ideal for large-scale investments or expenditures, such as business expansion, higher education, or major medical treatments. 

Key Features of a Personal Loan 

Here are some of the key features of a personal loan: 

Loan Amounts and Terms: Smaller loan amounts and shorter repayment terms. 

Interest Rates: Higher interest rates which increase the total cost of borrowing. 

Advantages of Loan Against Property: Why is LAP a Better Choice?

Comparison of personal loans vs. loans against property highlights the financial efficiency and suitability of LAPs for substantial and strategic financial planning due to their lower interest rates and longer repayment periods. Opting for a loan against property often provides greater financial leverage: 

Cost-Effective: Lower interest rates make this loan option more economical over the long term. 

Higher Borrowing Limit: The ability to secure a higher loan amount can be critical for funding significant expenses or investments. 

Tax Benefits: Potential tax deductions on interest payments add to the financial benefits. 

Factors to Consider Before Choosing a Loan 

Before finalising a loan, it’s essential to carefully consider these factors to make an informed decision about your financial future. 

Assess Needs and Goals: A loan against property is generally more suitable for larger, long-term financial goals. 

Evaluate Financial Health: Consider your long-term repayment capacity. Repayment is typically more feasible with the lower interest rates offered by LAPs. 

Understand the Risks: While LAPs require putting up collateral, the financial benefits and lower costs often outweigh the risks for those with stable financial planning. 


While personal loans can be suitable for quick, short-term needs, a loan against property stands out as the better option for those looking to fund significant projects or consolidate higher debts. With lower interest rates, larger loan amounts, and the potential tax benefits, LAPs offer a more strategic, long-term financial solution. For those looking to invest wisely in their future, securing a loan against property could provide the financial stability and growth they seek. 



How much loan can I take against my property? 
The amount you can borrow with a loan against property typically depends on the value of the property you’re using as collateral. Generally, lenders offer around 50% to 70% of the property’s market value. However, this percentage can vary based on your lender’s policies, the condition and type of property, and your financial profile, including your credit score and income stability. To determine the exact amount you can borrow, the lender will appraise your property and evaluate your financial documents. 

What are the advantages of choosing a loan against property instead of a personal loan? 
A loan against property offers several benefits over a personal loan, particularly when it comes to securing larger loan amounts and achieving more favourable financing terms. Here are the key advantages: 

  • Secured, Low-risk Financing 
  • Lower Interest Rates 
  • Higher Loan Amounts 
  • Longer Repayment Terms 
  • Best Suited for Higher Loan Amounts 

Choosing a loan against property can be a strategic financial decision if you are seeking substantial funding with cost-effective terms. It is an ideal choice if you are comfortable using your property as collateral to leverage better loan conditions.

Ashutosh P
Ashutosh P

Ashutosh has more than 18 years of experience in commercial banking and SME finance. He heads the branding and marketing for the company and is also the product head for the secured business finance and rooftop solar finance business. Ashutosh boasts over 20 years of extensive experience in the fields of commercial banking and SME finance. Currently, he holds multiple key roles within the organization, including heading the MD's office, overseeing Strategy and Marketing, and serving as the Product Head for the rooftop solar finance division. Additionally, he spearheads various initiatives that have been instrumental in driving the company towards achieving significant impacts in environmental sustainability and financial inclusion.

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