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Difference Between Home Loan vs Loan Against Property

Borrowers are unsure about many of the financial terms of home loans. The majority of the time, borrowers confuse “loan against property” and “home loan,” as the advantages and features of the two loans might occasionally be extremely similar.

What is a home loan?

A home loan is a mortgage loan taken out to buy property. You can obtain a loan from the bank or any other financial organization that provides loans for buying a home. A mortgage is a specific kind of debt that must be repaid over time, typically in monthly installments. It may be referred to as a hypothec or ground rent in various countries. 

Factors determining a home loan

Lenders will consider your credit score, income, and assets to decide if you’re a strong candidate for a home loan. They’ll also take into account your debt load in relation to your income. People might use house loans to finance the purchase of their first home or real estate investments.

What is a loan against property?

When a person takes out a loan from a financial institution to purchase a piece of property, they must repay the lender with their monthly rent payments. This is known as a loan against property. A loan against property has an interest rate that is determined similarly to other types of mortgages. Read more here about mortgage loans.

Types of loan against property

Using loans against property, you can purchase a new home or add on to an existing one. While you make monthly payments to the lender for the duration of the loan, the lender holds the title to your house as collateral.

There are a few main types of loans against property:

Home equity loans

With these loans, a person may borrow up to 90% of the value of their home, with repayment spread out over 20 years.

Home equity line of credit

Similar to a credit card, this sort of loan allows the borrower to pay it off whenever they have money, but they also have access to cash up to 90% of the value of their real estate.

Second mortgages

One can only get access to 60% or 80% of house loans with this choice.

How much money can you borrow on a home loan and a loan against property?

The value of your property, the amount you want to borrow, and the type of loan you apply for all affect how much you can borrow on a house loan. You may determine how much you can borrow on a house loan in a number of ways, but the most popular method is to use an estimate of the worth of your home and the type of loan you are asking for.

The value of your property, the sort of loan you apply for, and whether or not there are other debts secured against it all affect how much you can borrow on a loan against property. You can use the value of your home as collateral for secured loans and unsecured loans, respectively. You must pledge your home as collateral for secured loans up until the loan is repaid.

The key differences between home loans vs loans against property

Interest rate

One of the main distinctions is that home loans often have lower interest rates than loans against property. In essence, some banks and lending organizations believe that property-based loans are defaulted on more frequently than other types of loans. To find current interest rates, use our EMI Calculator.


Compared to other types of loans, home loans are used less frequently. They can only be used to purchase real estate, such as homes or land, for construction. With a LAP, you can acquire a loan to fund anything, from launching a new business to paying for your child’s education. Your land holdings are used as collateral to get a LAP.

Loan to a percentage value

Another benefit of loans against property is that they typically provide 60% of the value of the property, compared to 90% for home loans.


The maximum tenure varies depending on whether you’re borrowing money to buy a car or a property in India. For instance, a home loan can be repaid over a 20-year period, whereas a car loan is normally repaid in 15 years.

Top-up option

Nearly all loans against property can be topped up without taking out a new loan. You now have more flexibility and can use one loan for several different things. Home loans typically do not include this feature, however, some institutions do, subject to further evaluation. 

Documentation process

Home loans are often authorized in roughly 15 days thanks to a very straightforward documentation process. On the other hand, processing loans against property requires a lot more time. It can take up to two weeks for approval because banks need to evaluate the property and the borrower’s circumstances.

Tax exemption

The main distinction between a personal loan and a loan for a business is that personal loans allow you to deduct the interest from your taxes. Home loans do offer certain tax benefits, although mortgages typically don’t. You can deduct interest under Section 24 of the Income Tax Act, and you can return principal under Section 80C.

Which is preferable?

Is taking out a simple home loan better than taking out a loan against property? As was already mentioned, it depends on your objectives. You should apply for a home loan if you want to buy a house but lack the funds to do so. In contrast, you would seek a loan against a property if you already own a home or business and need money to cover a specific requirement. 


Understanding the difference between property loans and housing loans helps you to choose the best one for you. The interest rates and repayment schedules are among the primary distinctions between a home loan and a loan against property. Although home loans have longer repayment terms—up to 30 years for some mortgages—they nevertheless have lower interest rates than personal loans. Personal loans feature longer interest terms, usually 5 years, and higher interest rates.


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