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Home loan versus loan against property
The article below aims to tell the difference between home loan and loan against property .A Home Loan is a loan which is thus extended by a lender for buying a home.
Tuesday May 23, 2017 , 2 min Read
This is a user generated content for MyStory, a YourStory initiative to enable its community to contribute and have their voices heard. The views and writings here reflect that of the author and not of YourStory.
The article below aims to tell the difference between home loan and loan against property.
1. A Home Loan is a loan which is thus extended by a lender for buying a home. It thus includes a loan which is taken for buying a plot and/or constructing a house on that plot (plot plus construction loans are known as Composite Loans).
Whereas, a Loan Against Property (LAP) is thus offered against a property that is however already in the borrower's name.
2. Home loan is however offered against a home property which the borrower intends to buy.
Whereas banks prefer to lend against a property that is under the borrower's possession ie against under self-possession . The Loan can however be against any property of the loan applicant and it is not necessarily against a residential property.
3. Home loans are however essentially the loans that are given by the bank for the purpose of acquiring a home or a however residential property
A LAP can thus be taken for the business use or even for the personal use, say, education for the children, marriage etc.
4. In case of home loans , the LTV (Loan to Value) ratio is generally higher in comparison to the LAP i.e. the Banks generally lend more for buying a house in comparison to availing of loan against a property.
5. Also in case of home loan , non-payment or the default, the bank can thus liquidate the property and can get back its used loan amount.
But in case of loan against property , the amount given as loan is irrespective of any purpose and it can thus be used for any immediate financial requirements, unlike a home loan.
This article has been contributed by Simmi setia, Content Writer, LegalRaasta- an online platform for a home loan, TDS software, Loan Against Property, GST software.