When Is A Loan Against Property A Better Option As Compared To Other Loans?

A loan against property might sound like a difficult term to understand; however, once you break it down to the basics, it is straightforward. Much like a regular loan, a loan against property (LAP) commonly known as a mortgage is used so that the borrower's monetary requirements are satisfied.

In this blog, we will be covering the following points:

1 What is a Mortgage Loan?

2 How is it different from a personal loan?

3 Why would someone want to apply for a mortgage loan? Click here to know how to

apply for a mortgage loan.

What Is A Mortgage Loan?

A mortgage is a loan issued by a financial institution such as a bank where you can avail funds by offering your assets as collateral. This is a type of loan where the borrower can avail a high amount of funds for a prolonged period. This extended period can sometimes last up to even 30 years.

In case the borrower cannot repay the loan, then the bank will keep the collateralized asset for itself.

How is A Mortgage Loan Different From A Personal Loan?

There are two main ways in which a mortgage is different from a personal loan. These are

1 The Tenure of The Loan and The Interest Rate:

A personal loan is taken for a much shorter period than a mortgage. For example, a personal loan taken to buy a car needs to be paid back within a maximum period of 96 months or eight years. A mortgage loan, however, can be taken for much longer periods, even up to 30 years. Since money is leaned for a longer period by the bank, a Mortgage loan generally has a higher interest rate than a personal loan. If you take a look at the pnb housing finance mortgage loan interest rate, you will find that this is true.

2 The Purpose of The Loan:

A personal loan or a home loan can only be used for a specific purpose, such as purchasing a home or a commercial space. On the other hand, there are no restrictions on the usage of a loan against property. This kind of loan can be used to fund education, weddings, renovations, etc.

Conclusion: Why Would Someone Apply for A Mortgage Loan?

If you are looking to take a mortgage loan, you probably have to borrow a considerable sum of money and will only want to repay it in the long term. This means that young families who are looking to move into their homes would take out a mortgage. Mortgages permit you to buy luxuries that you can't afford today and allow you to pay for them over the long term. Because they are collateralized from financing banks can offer them to customers without facing much risk.

When it comes down to the basics, it is up to the customer to decide whether paying cash or taking a mortgage is of better value to him. If you feel like you can re-invest the cash you have in hand and generate greater returns over time with that money, then a mortgage is for you.