Home loan versus loan against property
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.