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A loan against property can be availed in two ways and based upon the manner in which this is taken the repayment will have to be done. When the loan is taken as a term loan it will be repaid in the normal way, like other loans. This means that there will be the regular equated monthly instalments (EMIs) for the time duration of the loan, and the loan will be repaid when the EMIs for the entire duration are paid back. There can also be a lump sum prepayment if the loan condition allows this, but this might come with a prepayment penalty. This is a fixed method that will ensure that a specific sum is repaid regularly to the bank by the borrower. On the other hand, when it comes to the overdraft form of the disbursement the amount can be paid back as and when the money is due. However, there is a specific time period at the end of which the balance has to be brought back to zero. In the intervening period the amount that is required can be used and the interest is charged accordingly. This gives a larger amount of flexibility to the borrower to undertake the necessary means to repay the loan.

Loan against property is not a very long-term product in the sense that while there might be housing loans that go up to 15 years or even 20 years this kind of period will not be witnessed in such loans. Usually, the maximum period for the loan is fixed at 7 years and most banks will usually not give a loan against property for a period that exceeds 5 years. The reason is that the amount is not being lent for a specific purpose. Thus if there is a shorter time period then it can be ensured that the amount is used effectively and the figure will also be repaid quickly rather than let it go on for a longer time frame.

One of the important factors that have to be present in a loan against property is the ownership of a property. There are a few conditions that are related to this ownership and one of them is that it should not be under any other mortgage. This is to ensure that there are no loans that are already outstanding against such a property and only then can there be a loan taken against the property. It is not very important as to whether the property is lying vacant or you are residing in it because the ownership of the property is more than enough for the entire transaction to go through.

There is a big difference between a home loan and a loan against property. Home loan is a loan that is taken for the purpose of buying a house. The bank or financial institution lends the money for the purchase of the house and the security available for the borrowing is the house itself. As against this, loan against property is a loan that can be used for any purpose. Though the security for the loan is a property the use can be anything and this is the major difference between the two loans.

In any kind of borrowing, the interest rate that is charged depends upon the purpose for which the amount is being borrowed and the security that is given at the time of borrowing. When it comes to personal loans as well as credit cards there is no restriction on the purpose for which the amount can be borrowed. Thus you can use the funds for a wide variety of purposes without the bank monitoring the use of the funds. Similarly, the amount that is borrowed against property can be used for a wide variety of purposes. But there is no security that is present for a personal loan as well as credit cards. This raises the cost for these borrowings. Even though the nature of the borrowing is the same in all three cases since there is a security present for the borrowing against property there will be a reduced rate of interest on it. This reduces the cost for the borrower, making the entire process more affordable for him/her.

One important feature on which loans are compared is the interest cost and as far as the loan against property is concerned there is a big benefit available here. As compared to various other routes like a personal loan or even a credit card where there is no security available, the interest that is applicable on a loan against property will always be lesser amount. However, loans for specific purposes like home loans might turn out to be cheaper than loans against property. The rate of interest reduces the cost of the borrowing and makes funds available at a cheaper rate and this is a good thing for anyone looking for borrowing funds.

Loan against property, as the name suggests, is a loan that is available to individuals as well as businesses against the security of their property. This is a means that ensures that people can raise funds against the security of their property in an easy manner. This provides liquidity to all those who might have an asset with them but not adequate funds in order to achieve their various objectives.