When buying a home, most of the people naturally look at home loans as their first option. But did you know you could also consider a Loan Against Property (LAP)?
Both options can fund your home purchase—but they are fundamentally different in structure, interest rates, repayment terms, and eligibility. In this guide, Vizzve Finance helps you understand the pros, cons, and ideal use cases for each so you can make an informed decision.
📌 Quick Summary: Home Loan vs. Loan Against Property
| Feature | Home Loan | Loan Against Property (LAP) |
|---|---|---|
| Purpose | Purchase/build a house | Raise funds using owned property |
| Type of Property | For buying new/under-construction | Uses existing owned property as collateral |
| Interest Rate | Lower (8.3%–9.5%) | Slightly higher (9.5%–12%) |
| Tenure | Up to 30 years | Up to 15–20 years |
| Tax Benefits | Yes (under Sec 80C & 24b) | No tax benefit for purchase use |
| Loan-to-Value (LTV) Ratio | Up to 90% of property value | 50–70% of property’s market value |
| Processing Time | Faster | Slightly longer due to property vetting |
| Ideal For | Buying a home | Large urgent needs with property asset |
🏦 What Is a Home Loan?
A home loan is a secured loan used specifically to buy, construct, or renovate a residential property. The property you're purchasing is the collateral itself.
✅ Key Benefits:
Lower interest rates
Longer repayment terms
Income tax benefits under Section 80C and 24(b)
Higher LTV (loan-to-value)
🏠 What Is a Loan Against Property (LAP)?
A Loan Against Property allows you to mortgage an already-owned residential or commercial property to get funds. While it can be used for many purposes, some buyers use LAP to self-finance a home purchase, especially when home loan eligibility is tight.
✅ Key Benefits:
Can be used for any purpose: home, business, education, etc.
Higher loan amounts possible (based on asset)
Flexibility in use of funds
Good option for those with weak home loan eligibility
🤔 When to Choose a Home Loan
You are buying a new/under-construction house
You want maximum tax deductions
You qualify based on salary/income proof
You want lower EMI with long tenure
You are eligible for PMAY subsidies
🤨 When to Choose a Loan Against Property
You already own property and don’t want to sell it
You’re not eligible for a high home loan due to CIBIL/income
You want to raise funds quickly and flexibly
You're planning to buy a resale property or through full cash
🧮 Example Scenario: Comparing Loan Costs
Let’s say you need ₹50 lakhs for a home purchase.
| Loan Type | Interest Rate | Tenure | EMI (approx) | Total Interest Paid |
|---|---|---|---|---|
| Home Loan | 8.5% | 20 yrs | ₹43,391 | ₹54.1 lakhs |
| LAP | 11.0% | 15 yrs | ₹56,371 | ₹51.5 lakhs |
Insight: LAP has a shorter tenure and higher EMI, but may be useful for high-value borrowers with asset backing.
💡 Vizzve Finance Recommendation
✅ Choose a home loan if you qualify—it’s tailored for home purchases and offers maximum tax benefits and low rates.
🟡 Consider LAP only if:
You already own a high-value property
You’re unable to get a regular home loan
You need a larger or quicker disbursal despite higher interest
With Vizzve Finance, our experts compare both loan types, explain your true eligibility, and help you choose the best-fit option based on your goals.
📂 Documents Required (Quick Comparison)
| Document Type | Home Loan | LAP |
|---|---|---|
| Identity/Address | Aadhaar, PAN, Utility Bills | Aadhaar, PAN, Utility Bills |
| Income Proof | Salary slips, ITRs | ITRs, Business Proof, Rental Income |
| Property Docs | Property to be purchased | Property you already own |
| Credit Report | Required | Required |
📌 Conclusion
Both home loans and loans against property can help you buy your dream home. But the loan type you choose affects your EMI, tenure, interest, and tax savings. With Vizzve Finance, you don’t have to choose blindly—we help you compare, calculate, and apply for the best option that aligns with your income, credit, and goals.
Published on 3rd july
Publisher : SMITA
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