What is the Difference Between Home Loan vs Loan Against Property?

Home loans and loans against property are both types of secured loans that are offered by banks and financial institutions. Both these loans are available with all major firms like Shriram City or IIFL Securities. While both types of loans are secured by a property, there are some differences between them. Purpose For the aim of buying or building a residential property, a house loan is obtained. Nonetheless, a loan against property can be used for either personal or business purposes. This covers paying for healthcare costs, business growth, and other expenses. Collateral A home loan is secured against the residential property being purchased or constructed, while a loan against property is secured against an existing residential or commercial property that the borrower owns. Loan Amount The cost of the home purchased or built determines the loan amount. Whereas, the value of the asset used as collateral determines the loan amount for a loan against property. A house loan often has a bigger loan amount than a loan secured by property. Interest Rate Home loans often have interest rates that are lower than loans secured by real estate. This is due to the fact that house loans are thought to be less risky for lenders because the loan's purpose is obvious and the property being bought or built serves as collateral. As loans against property can be accepted for any purpose, they are thought to be riskier. Loan Tenure The tenure of a home loan is usually longer than the tenure of a loan against property. Home loans can have a tenure of up to 30 years, while the tenure for loans against property usually ranges from 5-15 years.

The only similarity between a home loan and a loan against property is that both are secured loans. However, to understand what is the difference between home loan vs loan against property, one has to first know the meaning of these two loans separately. So let me share here the definitions first and then their differences.

A home loan is a loan that one takes to buy a ready-to-move-in house, a property under construction or land where the applicant intends to build a house. This is a secured loan and the borrower needs to pay a fixed EMI monthly to pay off the debt. 

A loan against property is a type of loan where the borrower pledges his existing property for a sum of money. He/she must hand over the property to the lender until the money gets paid fully. The amount can be paid in EMIs as well.

The differences between home loans and loans against property are-

I hope the concept of home loan vs loan against property is totally clear to you now.