Everyone has different financial goals in life and he or she does their best to meet the goals in a hassle-free manner. However, not all financial goals can be accomplished within the limited cash flow available in hand. And in such situations, loans come in handy.
Individual requires loan for their major financial goals in life. If you are in a situation where you need to meet the major financial goals or investments in life, taking out a loan could be the best bet ever. Generally, people look for home loans as their major financial goals are to be a homeowner. This is why would-be homeowners look for the best suited loan options available in the financial market and meet their goals in a fuss-free manner.
Now, the question comes of which loan will suit your purposes of buying a new home or renovating the existing one. Well, you might come across two terms generally in such situations one is home loans
and another is the loans against property. Which one is right for you? Of course, situations are there where home loans and loans against property or mortgage loans work differently.
To understand them, let’s dive deep into the guide:
Home Loans vs. Loans Against Property
In recent times, both terms home loans and loans against property
are used interchangeably and borrowers get confused between the two, as their features and benefits make it tough for them to choose the right one. Well, you don’t have to panic. Here you will read about the major differences between home loans and loans against property to make the right financial decision.
Loans against Property in a Glance
Loan against property or mortgage loans are secured loans that help borrowers to meet their personal or business financial needs by mortgaging property. These are ideally designed to suit various purposes. Whether it is about the expansion of your business or you just want to create extra space in your home to make it more comfortable to live for your family.
What are Home Loans All About?
On the contrary, home loans are meant for buying a property. These loans are too secured in nature. But, you can use it to finance your real estate investment only. These loans are dedicated to making your real estate investment easy and affordable. If you take home loans, you also have to provide a valuable asset to pledge the loan amount.
Now, you know the basic difference between the two and you might get confused about when you should go for home loans and when to apply for loans against property. To understand this better, read on to and know everything associated with these loans.
Major Differences Between Loans against Property and Home Loans
When you are planning to take out a long term loan, you might get confused about whether the home loan is right or loans against property will suit your purposes. Now, no more confusion! Just check out the major differences between the two and then decide which loan alternative will best suit your purposes.
The rates of interest have a huge impact on these loan options. Generally, loans against property have higher interest rates than home loans. In the case of loans against property, the rates of interest remain fixed and high. On the other hand, home loans have slightly lower rates of interest. Moreover, the banks allow you to buy home loans with fixed or floating interest rate options.
Maximum up to 60% of the property value is granted when you apply for loans against property and home loans are offered with a maximum of 90% of the value of the property. However, property valuation is done in the case of loans against property. Therefore, you should consider this point carefully.
Home loans are generally sanctioned for the purposes of buying or procuring a home, under construction property, and plot. And borrowers can use loans against property for their personal, commercial, and industrial purposes. Therefore, you should apply for loans on the basis of the purposes for which you are applying.
Loan tenure makes a huge difference when it comes to understanding the difference between home loans and loans against property. Generally, home loan tenure can be of a maximum of 30 years while the tenure for loans against property could be up to 15 years.
So, these are the major differences between home loans and loans against property. If you are wondering which loan option is right for you, the above-mentioned points will surely help you decide. Now, consider all the factors described in this post and then decide whether to opt for home loans or loans against property.
As you can see, not both loans are entirely the same. However, the one thing in common between the two is that home loans and loans against property are secured against property. Now, consider your borrowing needs and pick the right loan option that helps you meet your purposes.