Loan against Property vs Loan against Securities
When in need of funds, individuals often consider leveraging their assets to secure loans. Two popular options are loan against property and loan against securities. While both provide financial assistance, they have distinct features and considerations. In this article, we will delve into the differences between loan against property and loan against securities to help you make an informed decision.
Comparison Between Loan against Securities vs Loan against Property.
| Category | Loan against Securities | Loan against Property |
| Application process | Many NBFC and Banks supports online applications for loan against securities which is entirely digital and only takes 15 minutes to complete the application | Applications for Loan against property often involve offline processes and extensive documentation requirements. |
| Loan Amount | ₹25000 to ₹5Crore | Up to ₹ 25 crore |
| Rate of Interest | • Flat 10 % p.a on reducing balance | • Starts from 8% p.a to 18% p.a |
| Processing Fee | • 1% of the loan amount plus applicable service tax | • 1% - 3% of the loan amount + GST |
| Loan Tenure | Upto 24 Months Tenure, 6, 9, 12, 24 Months Tenures | From 5 years to 20 years |
| Eligibility | • Applicant must be at least 18 years of age and not more than 75 years old. | • Type of property- The property should be in India, be it a residential or commercial property. • Minimum and maximum age- 18 to 70 years • Employment type- Salaried or Self-employed |
| Credit Score | • No Credit Score Limit | Credit Score- 750 and above |
| NRI Cutomers | • Supports NRI customer with NRE and NRO accounts | NA |
| Loan to Value (LTV) Ratio | LTV Ratio - Up to 80% of the portfolio value | LTV Ratio - Up to 75% of the value of the property |
| Prepayment charges | No Pre-payment penalty after first EMI payment | As per the terms and conditions |
| Payment Options | • EMI Repayment: Pay a monthly instalment that is divided between interest and principal repayment. • Balloon Repayment: Pay only the loan interest every month and the principal amount at the end of the loan period. |
• EMI Repayment: Pay a monthly instalment that is divided between interest and principal repayment. • Balloon Repayment: Pay only the loan interest every month and the principal amount at the end of the loan period. |
| Documentation | • Fully Digital • Aadhaar number • PAN Number • Bank IFSC code • Bank Account number • Mobile number associated with your Aadhaar & Bank account |
• Proof of Identity-PAN card, Passport, Driving License, Voter ID etc. • Proof of Address-Passport, Electricity Bill, Aadhaar card, etc. • Property Documents-Copy of original sale deed, allotment-possession letter, NOC from society. • Proof of Age-Passport, PAN card, etc. • Income Proof- Latest Income Tax Return Certificate, Form 16, salary slips, audited financial sheet, certificate of practice, qualification certificate, Shop Act License, Sales Tax Certificate, etc. |
| Turnaround time | 15 Minutes | 5 to 20 Days |
| Loan on all days | • Loan on all days, including saturday and sunday | • Monday to Friday. |
| Pros | • Faster Processing of the loan • Comparatively lower interest rates • Lower Processing Fee • No prepayment charges after 6 months • Loans can be availed as overdraft • Pay interest only on the used amount |
• Competitive interest rates • Higher Loan Amount |
| Cons | • No longer tenures | • Higher turn around time • Higher processing fee • Extensive paperwork |
Loan Against Property: Loan against property allows individuals to utilize the value of their property to secure a loan. Whether residential or commercial, property serves as collateral, enabling borrowers to access substantial funds. Let's explore the key aspects of loan against property:
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Collateral: Loan against property involves using your property as collateral. The property is evaluated for its market value, and the loan amount depends on its worth.
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Loan Amount: Due to the substantial value of property, loan against property generally offers higher loan amounts compared to other forms of loans. The loan amount is determined based on factors like property value, income, and repayment capacity.
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Repayment Tenure: Loan against property typically comes with longer repayment tenures. Borrowers have the flexibility to choose an appropriate repayment schedule that aligns with their financial goals.
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Interest Rates: Interest rates for loan against property depend on multiple factors, including the loan amount, property value, borrower's creditworthiness, and prevailing market rates.
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Property Ownership: While the property is used as collateral, borrowers retain ownership and can continue to use it for personal or business purposes during the loan tenure.
Loan Against Securities: Loan against securities involves pledging your financial assets such as mutual funds, shares, or fixed deposits to secure a loan. Here are the key aspects to consider:
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Collateral: Instead of property, loan against securities uses financial assets as collateral. Commonly accepted securities include mutual funds, shares, bonds, and fixed deposits.
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Loan Amount: The loan amount for loan against securities depends on the value of the pledged assets. Lenders typically offer a percentage of the securities' market value as the loan amount.
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Repayment Tenure: Similar to loan against property, loan against securities offers flexible repayment tenures, allowing borrowers to repay the loan over a convenient period.
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