A need of fund arises at any point of time in life. Nowadays, we prefer banks and NBFCs to overcome the requirement of funds as they help in meeting the immediate requirement of funds. Different types of loan options are available in the market such as a business loan, loan against property, home loan, personal loan etc and with these various options, it becomes very difficult to choose which type of loan serve you in a better way. The funds should be borrowed on the basis of your requirements. You should also consider certain factors such as EMI amount, a rate of interest, loan tenure, LTV etc. So, we should choose carefully which be more advantageous for you.
Loan Against Property
Loan against property is a secured loan as the name suggests. You have to mortgage your property as collateral to get the funds. Almost all the banks and NBFCs offers loan against the property at an attractive rate of interest. The loan amount is approved according to the value of your property which is commonly known as Loan to Value (LTV). It is approved when the applicant is creditworthy and the value of property covers the loan amount. It is generally available at a lower rate of interest as compared to the unsecured loan.
A business loan is an unsecured loan which does not require any collateral. It is generally availed to diversify business needs such as an expansion of business, purchasing stocks, inventory, machinery etc. It is very beneficial when you don’t any property to mortgage because it doesn’t require any guarantor or collateral. Business loans are instantly available and the disbursal of unsecured business loans takes the least possible time. Minimal documentation is required and you can apply for the loan online and get funds in your account within minutes. So, when businesses need immediate funds, they resort to unsecured business loans for their ease of availability.
Loan Against Property Vs Business loan
A loan against property is a secured loan, there is a chance of getting higher loan amount compared to the business loan. You can avail the loan amount up to 70% of the value of your property. On the other hand, a business loan is an unsecured loan and come under risk. So, the bank usually approves limited loan amount. The approval of the loan amount depends on your income and the repaying ability.
A loan against property is available for a higher tenure as compared to the business loan. The tenure can go up to 15 years and in case of a business loan, tenure generally goes up to 5 years. A business loan is preferable only when you want to close your loan early.
The interest rate of loan against property is lower compared to the business loan as the lender has low risk in case of defaults. The interest rate of Loan against property ranges between 8.80% to 16% and that of business loan 16% to 24%.
So, the loan against property is more preferable compared to the business loan as it comes with a lower rate of interest, longer tenure, a larger ratio of loan approval etc. A business loan is not provided for the business startup in that case you can easily avail the loan against property.