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Difference Between
Home Loan vs Loan Against Property

There are numerous financial terms for home loans that leave borrowers uncertain. Most of the time, borrowers get mixed up between ‘Loan Against Property and ‘Home Loan’, as the benefits and features of both loans can be very similar at times.

What is a Home Loan?

A home loan is a mortgage loan that is used to purchase a property. The loan can be taken from the bank or any other financial institution that offers loans for home purchases. A mortgage is a type of loan that the borrower pays back through periodic payments, usually monthly instalments. In some jurisdictions, it may be called a hypothec or ground rent. Get in touch with us to know more.

Factors determining a Home Loan

To determine if you’re a good candidate for a home loan, lenders will look at your credit score, income and assets. They’ll also consider how much debt you have relative to your income. Home loans are used to help people purchase their first home or invest in real estate.

What is a Loan against Property?

A loan against property is when someone borrows money from a financial institution to buy a property and then pays back the lender with the monthly payments of their rent. The interest rate for a loan against property is calculated in the same way as for any other type of mortgage. Know more about mortgage loan here.

Types of Loans Against Property

  1. Loans against property are used to buy a new home or expand an existing property. Lenders take the title of your home as collateral while you make monthly payments during the time of the loan.

    There are a few main types of loans against property:

    • Home equity loans – These loans allow a person to borrow up to 90% on some value of their home which is then paid back over twenty years.
    • Home equity lines of credit (HELOC) – This type of loan works similarly to a credit card and the person can pay it off whenever they have money available, but they have access to cash up to 90% on their real estate’s value.
    • Second mortgages – With this option, a person only has access to 60% or 80% on home loans.

Why is it Important to Understand the Difference Between the Two?

The major confusion between a home loan vs loan against property occurs because both are secured loans. But that’s about where their similarities end. A property loan is an agreed upon sum of money that a borrower has to pay back with interest to the lender. The main difference is that the collateral for this type of loan is not owned by a formalized lending institution but rather, belongs to the borrower himself. For example, a mortgage can be repaid in monthly installments of the total loan amount and its interest rate. If the borrower is unable to repay his loan, the lender can auction off their security property to retrieve his investment.

How Much Money Can You Borrow on a Home Loan and a Loan against Property?

The amount of money you can borrow on a home loan is determined by the value of your property, the amount you want to borrow, and the type of loan you apply for. There are several ways to calculate the amount of money you can borrow on a home loan, but the most common way is to use an estimate of the value of your property and the type of loan you are applying for.

The amount of money you can borrow on a loan against property is determined by the value of your property, the type of loan you apply for and whether or not there are any other loans secured against it. There are two ways in which you can use your home’s value as collateral – secured loans and unsecured loans. With secured loans, you will be required to put up your house property until you repay the loan. 

RBL Bank Home Loan Processing Procedure

The process of getting a home loan from RBL Bank is not only simple but also transparent. The customer can get in touch with the bank for any queries related to the procedure.

The procedure starts with filling up a form that is available on the website and then submitting it. After which, the bank will do a pre-approval of the loan amount and then send an email with all the documents required for processing.

The next step is to submit all documents as per requirement and if everything goes well, they will provide you with a provisional approval letter. The last step is to submit your final documents and sign on dotted lines at the RBL Bank branch or their authorized agent.

What are the Main Differences Between These Two Types of Loans?

There are two main differences between these two types of loans: 

First, a personal loan is typically for a smaller amount of money than a mortgage. Second, the terms of repayment are more flexible with personal loans.

Personal loans are usually for smaller amounts of money than mortgages and have more flexible repayment terms.

Home loan vs loan against property

home loan vs loan against property


The key differences between home loan vs loan against property

Interest Rate: One of the key differences is that interest rates on loans against property are normally higher than those levied on home loans. Essentially, some banks and lending institutions think that people default on loans against property more often than against other types of borrowing. Use our EMI Calculator to get interest rates.

Usage: Home loans have fewer uses than many other kinds of loans. They can only be used to buy property, for instance, that’s for living in or for constructing. A LAP is a loan where you can borrow money to do anything that ranges from starting a new business to getting your child an education. A LAP is secured using your land assets as collateral.

Loan to Percentage Value: Another good thing about loans against property is that they offer around 60% of the property value, whereas with home loans this figure can increase to 90%.

Tenure: If you’re borrowing money to purchase a car or property in India, the maximum tenure will vary. For example, home loans can be paid off over 20 years while vehicle loans are typically paid back in 15 years.

Top-Up Option: It is possible to top up almost all loans against property, without taking out a new loan. This gives you more flexibility and means you can use one loan for multiple purposes. Typically, home loans don’t come with this facility – but some banks do offer similar products, pending further assessment. Find the best option suitable for you by reaching us.

Documentation Process: Home loans traditionally consist of a relatively simpler documentation process which allows them to be approved in about 15 days. Loans against property, on the other hand, take a lot more time to process. This is because banks need to assess the property and the borrower’s situation, and therefore it takes up to two weeks for approval.

Tax Exemption: The most important difference between a personal and business loan is that you can deduct the interest from your taxes on a personal loan. While mortgages usually entail no tax benefits, home loans do indeed offer some sweeteners. Section 24 of the Income Tax Act lets you claim the interest and Section 80C is available for the principal repayment.

What are the pros and cons of Home loan vs loan against property?


With a loan secured by property, borrowers can use the funds for a variety of personal and business endeavours, including starting businesses or increasing their borrowing capacity to cover unanticipated medical costs. The fact that lenders receive a guarantee for the money they give makes this loan reasonably simple to obtain. Because borrowers can borrow a sizable sum—up to 70% of the value of the property, and have flexibility with payments, as well as the interest rate being lower than that of other loans, it is currently in high demand. Lower EMIs are possible with longer loan repayment terms.

A loan against property may qualify for tax benefits on the interest paid, and lenders often don’t charge penalties for early loan repayment. To know more, contact us.


As lenders conduct a background check on the applicant to ensure that the candidate is real, the waiting period to acquire the loan is rather lengthy and can be frustrating. Additionally, banks and other financial organisations take a time-consuming look at the applicant’s credit history, repayment capacity, and other factors. The value of the asset being used as collateral could also be a concern. There is no clear standard or pattern; various banks value qualities using different criteria.

The main danger is that, in the case that the borrower defaults on the loan, the lender will have sole control of the property pledged. To recoup its investment, the lender may decide to sell the debt or restructure it. It may still assert the remaining due that are pending.

Which is preferable: a loan against property or a home loan?

Is a straightforward home loan preferable to borrowing money against a loan against property? As was previously stated, that depends on your goals. If you’re interested in purchasing a home and need the money to do so, you should apply for a home loan. In contrast, if you already own a home or business and you require money to meet particular needs, you would apply for a loan against the property. Know which loan suits you best by reaching us. 


One of the main differences between a home loan vs loan against property is the interest rates and repayment periods. Home loans have lower interest rates than personal loans but have longer repayment periods which can be up to 30 years for some mortgages. Personal loans have higher interest rates and shorter repayment periods which are typically around 5 years.

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