₹25 Lakh Loan on Property vs Personal Loan: Which One Should You Choose?

When it comes to borrowing money for major expenses, you have multiple options to choose from. Two primary choices are a loan on property and a personal loan. Each of these has its benefits and limitations, and selecting the right one heavily depends on your financial goals, repayment capacity, and purpose of the loan. Whether you're planning to fund your business, renovate your home, or cover unforeseen expenses, understanding the differences is crucial. Additionally, your identification documents, such as a voter ID card print, play an essential role during the application process.

Here, we will compare these two loan options to help you make a better decision.

What is a Loan on Property?

A loan on property, also known as a mortgage loan or a secured loan, involves pledging your property as collateral to the lender. The lender provides the loan amount based on the value of the property. You can borrow large sums, such as ₹25 lakh or more, depending on the valuation of the pledged property.

Key Features of a Loan on Property

• Collateral-Based Loan: Your property serves as security, reducing the lender’s risk.
  
  

• Higher Loan Amounts: Since it's secured, the lender is more inclined to approve large amounts.
  
  

• Lower Interest Rates: Secured loans generally come with lower interest rates compared to unsecured loans.
  
  

• Longer Repayment Tenure: You can repay the loan over an extended period ranging from 10 to 20 years.
  
  

• Eligible Property Types: Residential, commercial, or industrial property can be pledged.
  
  

However, the drawback of this loan is the risk involved. If you default on repayments, the lender has the right to seize and sell the property to recover their money.

What is a Personal Loan?

A personal loan is an unsecured loan, meaning you don’t need to provide any collateral to acquire it. Personal loans are highly flexible and can be used for a variety of purposes, but they usually come with higher interest rates compared to secured loans like loans on property.

Key Features of a Personal Loan

• No Collateral Required: As it is unsecured, you don’t need to use your assets as security.
  
  

• Quick Approval: Personal loans are processed faster, provided your documents such as the voter ID card print, income proof, and bank statements are in place.
  
  

• Higher Interest Rates: Lenders charge more interest for personal loans because of the lack of collateral.
  
  

• Shorter Tenure: Repayment terms are generally shorter, ranging between 1 and 5 years.
  
  

• Limited Loan Amounts: The loan sanctioning limit might not exceed a certain threshold, depending on your credit score and repayment capacity.

A personal loan is best suited for smaller financial needs or emergencies. However, the high interest and shorter repayment period mean higher EMIs (equated monthly installments).

Voter ID Card Print and Other Essential Documents for Loan Applications

Whether opting for a loan on property or a personal loan, presenting accurate documentation is vital. A voter ID card print, along with other identification documents such as Aadhaar card or PAN card, is required to authenticate your identity. Some lenders may also request address proof and income-related documents, including salary slips, IT returns, and bank account statements.
Ensure that all your documents are in order and updated, as incomplete documentation can lead to delayed approvals or rejection of your loan application.

Key Differences Between Loan on Property and Personal Loan

1. Loan Amount

A loan on property allows you to borrow larger amounts, such as loan 25 lakh or higher, whereas a personal loan often has a cap depending on your creditworthiness.

2. Interest Rates

Interest rates for loans on property are typically lower because they are secured. In contrast, personal loans tend to have higher rates.

3. Risk Factor

A loan on property involves the risk of losing your property if payments are missed. Personal loans carry no such risk since they are unsecured.

4. Approval Time

Personal loans have faster approval and disbursement times, ideal for emergencies. Loans on property take longer due to property valuation procedures.

5. Usage

Both loans can be used for any purpose, but personal loans are better suited for smaller, immediate needs, while property loans cater to larger funding requirements.

Conclusion: Which Loan Should You Choose?

Selecting between a ₹25 lakh loan on property and a personal loan depends on your financial situation and needs. If you require a substantial amount and are confident in your repayment ability over a longer tenure, a loan on property might be the right choice. The lower interest rate and extended tenure ensure reduced financial strain. However, if the loan amount is smaller and you don’t want to risk your assets, a personal loan is a safer alternative.
Regardless of your choice, make sure your documents, such as your voter ID card print, are ready and updated for a smooth application process. Always evaluate your repayment capacity, weigh the risks, and ensure that you’re making a financially sound decision. After all, managing debt responsibly is the key to achieving your financial goals.