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Tushar Sharma

@letsuser | Posted on |

Why Loan against property a better lending option then Unsecured Loans


There are two types of loans available in the market i.e. Unsecured loans and Secured Loans. However, it depends on your requirement and suitability that which type of loan will you choose to meet your immediate expenses. In an unsecured loan, there is no requirement to keep your asset or property as collateral or security to get a loan. You will be granted a loan amount as per your eligibility and affordability. An unsecured loan is generally a short-term loan and the rate of interest of the loan is comparatively higher. On the other hand, secured loans are loans, where you have to keep collateral with the lender to get your loan sanctioned. You may keep your spare property, residential or commercial to get a loan against your property.

It is always better to apply only for a secured loan if you have any property lying idle with you. This is because the rates of Interest for Loan Against Property or Mortgage Loan will be comparatively much lower than any unsecured loans. In addition to this, the tenure of your loan will be longer, which means the EMI will also be much lower for you to pay your loan back in easier terms. This will also allow you to apply for a higher loan amount.

On comparison of loan against property with unsecured loans, you will get to know how mortgage loans are a much better option than unsecured loans.

A mortgage loan or a loan against property is considered a good option for raising funds in a short period of time. This kind of loan is quite different from an unsecured loan. And in many ways, it is a better option than unsecured loans. Here’s why:

1) Interest Rate: When compared to unsecured loans like personal loan, the interest rate on loan against property or mortgage loan is relatively lower as the lender has a lower risk of default. The interest rate on loan against property ranges between 8.80% to 15.15%. The interest rate on an unsecured loan could be higher due to certain risk factors associated with it. The bank decides the interest rate based on your credit score, income, employment, and location.

2) You get a higher loan amount: You are eligible to get a higher loan amount as you kept your property as security with your lender against your loan. However, apart from the value of the property; income, age, past payment records, credit rating is also duly taken into consideration by the lender before applying for a loan. The loan amount limit for personal loans is up to 50k-50 lakhs whereas with a loan against the property you can look for huge amounts.

3) They have a longer tenure: Since mortgage loan is a secured loan and in this case, the lenders are willing to offer you a loan up to 15 years of tenure depending upon your age, income, and other eligibility criteria. However, unsecured loans are offered only up to 5 years and the limit of the loan amount is also comparatively smaller. In case you need a smaller loan amount without keeping your asset as collateral with the lender, taking a personal loan will be a good option but the best option will always be taking a loan against property of a small loan amount without any asset to pledge personal loan is a good option but the best option is always loan against property.

You may get troubled while choosing between the two options: unsecured and secured loan. Before applying for them, you need to be very clear about the benefits and risk associated with it. Above mentioned factors will give you a rough idea about why should you opt for a loan against property and not for unsecured loans.

Also Read:- 5 Qualities of a Good and Responsible Borrower