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3 Major Disadvantages Of Choosing A Personal Loan Over A Loan Against Home.

By Author: Sagar Pokale
Total Articles: 1

There might be several occasions in your life where you find yourself in need of urgent funds. It could be to keep a struggling business afloat or to expand and take your business to new heights or to finance your child's further education or marriage plans.

In such scenarios, you may be forced to borrow funds from a financial institution or bank as you might not have the required funds in savings or you may not want to liquidate your assets. If you feel like you are in a financially well-off position to go into debt, then taking a loan makes sense.

However, when you go into the market to look for finance options, you might find yourself confused between two potential solutions. The first being a personal loan and the second being a loan against home.

Most people go in for a personal loan as they do not want to risk their property. This decision has several drawbacks and to help you make a well-informed choice, this article will highlight 3 major pain points of choosing a personal loan over a loan against property.

1. The cost of a personal loan versus a loan against home.
Probably one of the biggest disadvantages of opting for a personal loan is the cost at which this financial instrument is made available to you. Going in for a personal loan will mean you have to pay interest rates between 16 and 22 percent per annum.

These rates are exuberantly high when compared to the rates of a loan against home that comes with rates between 9.50 and 11.60 percent per annum. Therefore opting for a personal loan is bound to cost you a lot more than a loan against property.

2.The funding on offer with a personal loan versus a loan against home.
Another substantial drawback of a personal loan is the funding on offer. Generally, most personal loans offer a maximum of 15 or 20 lakh of the loan amount. These amounts usually pale before the funding on offer with a loan against property owing to the fact these loans provide you up to 60% of the property's value as the loan amount and with property prices running into the crores these days, your loan amount with a LAP is sure to exceed the loan amount of a personal loan.

3. Tenures of a personal loan versus tenures of a loan against home.
The tenure you are provided to repay a loan goes a long way in deciding just how easy or difficult it is to repay it. Longer tenures mean smaller EMI amounts and more scope to handle the repayment on terms you are comfortable with. Long tenures, on the other hand, mean much higher EMI amounts and can cause you a good amount of financial distress.

With a personal loan, you can expect relatively shorter tenures of around 120 months and with a loan against property, you can enjoy tenures as long as 15 years. This means a whopping 60 months more to repay your loan.

So if you're in the market looking for a loan offer to meet your urgent financial needs, don't look any further than a loan against home. It will provide you the funds you need at respectable interest rates and comfortable tenures ensuring your journey through debt and your financial needs are met with ease.

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