You are going through bad times….tough times…You need money in a hurry. Where do you get money in these difficult times? Should you go for the famous emergency or any time loan…The Personal loan…Is it wiser to opt for a loan against property?
A personal loan is often called the emergency loan or the anytime loan. You do not need to give any reason for availing a personal loan. You can avail it for any need. Personal loan is an unsecured loan (no collateral needs to be pledged), to avail a personal loan. Being unsecured it charges you a higher rate of interest, than most other loans. This loan is mainly availed for wedding expenses, your children’s education, starting a business and yes…a medical emergency. All you need is a good income and a good credit score. You earn a good salary and have a good cibil score? The bank would process your loan in no time.
You can pledge your property with the bank and avail a loan against it. You can pledge your residential property, commercial property or even a plot of land. This is a secured loan (property is pledged as collateral). This loan charges a lesser interest than the personal loan. You can use the money you get from the loan against property, for pretty much anything you want. Starting a business, a medical emergency, buying a car or even for your wedding expenses.
It takes a long time to process a loan against property. In a loan against property, you pledge your property and avail a loan. The bank has to verify your property documents, before sanctioning your loan. The bank does a due diligence check to confirm that you are the owner of the property. This takes time. It takes about 15 to 30 days to process the loan against property.
What about the personal loan? You have a good income and a good cibil score. You fit the banks eligibility criteria? Your personal loan might be sanctioned in a day or a week. Your personal loan is processed in no time. You need a loan in a hurry…Personal loan is your only choice. You need to be prepared to pay a high interest rate on this loan.
You might not be very comfortable pledging your home or property for a loan. You need to be absolutely sure you can repay your loan, otherwise there is a chance of you, losing your properly.
Personal loan is an unsecured loan (no collateral required). You are charged an interest anywhere between 17-24% a year. The loan against property is secured against your property (property is the collateral). Banks charge you an interest of 11-15% a year, on the loan against property. If you avail a loan against property, you save on interest as you pay lower EMI’s.
The loan against property gives you a tenure as high as 10-15 years, to repay your loan. The personal loan gives you a tenure of 1-5 years, to repay your loan. A longer tenure makes it easier for you to pay back your loan.
The bank sanctions a maximum personal loan of around INR 15 Lakhs to INR 20 Lakhs. This amount might not be enough to start a business. You have an LTV (Loan to Value) ratio of 50% to 70%, of the market value of your property. LTV of 50% means you can avail a loan against property, up to 50% of the value of your property. If you own a high value property, you can even avail a loan amount as high as a crore.
You have a poor cibil score? You would have no choice but to avail a loan against property. Banks do not sanction a personal loan, if you have a poor cibil score. Banks check your income as well as your cibil score, if you avail a personal loan. If you avail a loan against property, banks check your income and the market value of the property.
So here’s the debate….Personal loan or Loan against Property? Make this choice based on your needs.
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