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Home Loan vs Loan Against Property


rajukumar (Student)     11 July 2016

rajukumar
Student 
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I am considering to borrow some money against my flat in Bangalore which has been paid completely.  But when I enquired with few banks, they said that they don't provide/sanction home loans against already owned property. Moreover they suggested that I need to opt Loan Against Property, which is much more expensive. Generally what I have known that home loans these days carries an interest rate of 8.5-10% and where as 'Loan against property' carries a rate of 13-14%.

For me it seems completely illogical that I can not avail 'home loan' on a fully paid property. Please suggest if I am missing something here?

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Poornima Madhava (ACMA)     11 July 2016

Poornima Madhava
ACMA 
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Home loan is sactioned for the purpose of purchase/construction of house property. Now that you already have purchased the house property, this would not be applicable to you with respect to the subject property.

For details: https://www.deal4loans.com/loans/articles/home-loan-vs-loan-against-property/

https://forums.bankbazaar.com/t/what-is-the-difference-between-home-loan-and-loan-against-property/522

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Nitin Arora (Financial Audits)     11 July 2016

Nitin Arora
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I agree that home loan is the best loan and the rate of interest of a home loan is pretty lower than any other loan. But the interest rate of a loan against property is also low. Loan against property is also a secured loan where you have to keep your property as collateral with the lenders, so the interest rate is low.

The rate of interest of a loan against property cannot be so high. The rate you have mentioned 13%-14% is the rate of any unsecured loan. But you are trying to apply for a secured loan. It should be between 10% and 11% and not more than that.

You need to do a comparison among all the banks and NBFCs in the market to find the lowest possible interest rate in loan against property and then apply for a loan. I would recommend you to apply for a loan in any NBFC as they charge lower interest and offer better facilities. Also they provide flexible options to repay your loan through EMI, prepayment, etc. which you can calculate yourself using any emi calculator for home loan online.

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CA Siddharth Agarwal (Chartered Accountant & Banking Professional)     11 July 2016

CA Siddharth Agarwal
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Home loan is meant for Purchase of Property only, since in you have already purchased the property & paid the full consideration it normally will not qualify for a home loan.

However some organisations (NBFC) can refinance the purchase, which can be booked as a HL, where in HL rates will apply.

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NN SHARMA (MANAGER)     11 July 2016

NN SHARMA
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Please do not recommend NBFCs. Even though their ROI appears lower in some cases, their method of calculating interest and the drama they make when you try to close the secured loan is believed to be experienced.

I feel the best option is to compare ROI amongst different banks and choose the best one. State Bank group will be better bet. As far as not granting loan against existing house at lower ROI is for the reason that it is not considered as a priority advance as per RBI guidelines and generally loans are raised against finished houses for consumption purpose or aqire additional property or for some speculation purposes and carry higher ROI. 

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CA Siddharth Agarwal (Chartered Accountant & Banking Professional)     11 July 2016

CA Siddharth Agarwal
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Originally posted by : NN SHARMA
Please do not recommend NBFCs. Even though their ROI appears lower in some cases, their method of calculating interest and the drama they make when you try to close the secured loan is believed to be experienced.

I feel the best option is to compare ROI amongst different banks and choose the best one. State Bank group will be better bet. As far as not granting loan against existing house at lower ROI is for the reason that it is not considered as a priority advance as per RBI guidelines and generally loans are raised against finished houses for consumption purpose or aqire additional property or for some speculation purposes and carry higher ROI. 

Sorry to Differ, but NBFC are also governed by RBI, and are bound by the same framework as banks, in terms of calculation of the ROI or foreclosure .

Though banks may be a prefered choice, but NBFCs are no less. From my persosal experience I can say that they are more flexible in terms of calculating eligibilities and products and policies.

To me a Bank, NBFC & HFC would not make much of of difference till the time the financial need is fulfiied and the dealing is fair.

"A Rupee lent by a NBFC would value the same as a Bank"

Chinay Solanki (Chartered Accountant)     11 July 2016

Chinay Solanki
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Yes the rates are high in loan against property. But recently SBI have launched a new loan sales as asset backed loan, in which the loan is given against property and rate of interest is as low as in case of home loan. Go for it

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Sai charan (Article Assistant)     12 July 2016

Sai charan
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Originally posted by : NN SHARMA
Please do not recommend NBFCs. Even though their ROI appears lower in some cases, their method of calculating interest and the drama they make when you try to close the secured loan is believed to be experienced.

I feel the best option is to compare ROI amongst different banks and choose the best one. State Bank group will be better bet. As far as not granting loan against existing house at lower ROI is for the reason that it is not considered as a priority advance as per RBI guidelines and generally loans are raised against finished houses for consumption purpose or aqire additional property or for some speculation purposes and carry higher ROI. 

 

Priyansh Khushwaha (Chief Advisor)     17 February 2017

Priyansh Khushwaha
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A home loan allows you to buy a property. Since you have already applied for a home loan and repaid it already, you cannot legitimately request a home loan on that property again. A loan on property is what you’ll be required to apply for if you are looking for a new loan. With this type of loan, the current home you own will be kept as collateral with the lender.

The interest on loan against property cannot be as high as 13%-14%. Such high-interest rates are charged on the unsecured loan. However, as you are keeping your home as collateral, yours is a secured loan, and the maximum interest should be around 11%. Try to find out whether they are actually charging 13%-14% loan against property interest rates as there surely seems to be confusion.

Rather than visiting multiple lenders, use CreditNation for finding the best deals on loan against property. The platform works with several reputed lenders in the country and will surely help you find the cheapest loan against property.

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Amit Kumar   30 March 2018

Amit Kumar

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Home Loans-

  1. It’s a kind of loan which is mainly used for purchasing a Home, Home renovation or acquiring a residential property.
  2. And Most of Lender takes the paper as a collateral for that particular Loans.

Loan Against Property-

  1. Loan against property is a loan when lender provides loan against that particular property.
  2. In this loan that property consider as security deposit of that loan amount.


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