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When it comes to addressing business expenses, borrowers have two financing options available to them: 

  • Business Loans
  • Loan Against Property 

Both loan types suit different financial needs and have their features. Borrowers should assess their business requirements and choose a loan that aligns with their financial standing and future goals. To understand what each offer and the differences between a  Loan Against Property and a business loan, read on. 

A Loan Against Property is a loan availed of by keeping a property as collateral. In this type of loan, the lender has the borrower's property as security; therefore, a Loan Against Property is considered a secure loan. The loan amount can be utilised for any purpose, making it ideal for business-related expenses.

The amount availed of under a Loan Against Property depends primarily on the value of the property mortgaged and the applicant’s profile. This loan can be availed of against both commercial and residential properties. However, the property to be mortgaged must be free of any legal dispute.

Business loans are given specifically to meet business-related financial needs. For instance, one can avail of a business loan to expand their business or buy machinery and equipment. Business loans are unsecured loans, i.e., lenders do not ask for collateral or security while approving a business loan. 

Here are some of the reasons why a Loan Against Property is better than a business loan.

Attractive Interest Rates

Lenders keep a borrower's property as security until they have paid off the entire loan amount. Therefore, in the case of Loan Against Property, there is a lower risk involved for the lender, making the cost of borrowing a Loan Against Property more competitive. On the other hand, business loans are unsecured loans that put lenders at a higher risk. Therefore, business loans draw a higher rate of interest. 

Flexible Tenor

Basis eligibility, most lenders allow borrowers to let their Loans Against Property run for up to 18 years. Whereas, lenders allow borrowers to keep a tenor of up to 7 years in the case of a business loan. These figures may vary from lender to lender, but the allowed tenor for Loans Against Property is generally longer and more flexible. 

No End-Use Restriction

A Loan Against Property may be a better choice because there is no end-use restriction on the funds. One can use the money borrowed for any purpose – to meet wedding expenditures or pay for medical emergencies along with business expenses. Business loans on the other hand, allow the sanctioned amount to be only used for business-related expenses.

If you are planning to apply for a Loan Against Property, know that Bajaj Housing Finance offers competitive interest rates on these loans, complete with a flexible repayment tenor.

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