How can you Differentiate between a ‘Home loan’ and a ‘Loan against property’
I have discovered that a lot of people can’t differentiate properly between a ‘home loan’ and a ‘loan against property’. many of us decision me to inquire a few ‘home loan’ against security of a property already owned by them. it’s not a ‘home loan’. Instead, it’s a ‘mortgage loan’ or a ‘loan against property’ or a ‘LAP’. In fact, most of the folks assume the 2 area unit same. So, to facilitate them for clear understanding of the 2 ideas, i’m aiming to justify ten major variations between a ‘home loan’ and a ‘loan against property’.
1. Purpose- a housing loan is granted for purchase or construction of a replacement house whereas a ‘loan against property (LAP)’ is granted for a few alternative purpose against security of AN existing property. In alternative words, wherever a ‘home loan’ is granted, the property isn’t already owned by the recipient and also the loan is granted to accumulate or to construct a property (in some cases, consumer credit is granted for renovation/repair/addition also) whereas just in case of a ‘LAP’ the encumbered security is already owned by the recipient and he avails a loan against this property for a few alternative purpose.
2. Quantum of loan- a consumer credit will be granted up to ninetieth of the worth of the property whereas the LAP typically doesn’t exceed hr of the worth of the property. this can be as a result of, the govt. and also the run promotes ‘housing for all’ by minimizing the margin demand just in case of a consumer credit.
3. Interest- the speed of interest is often higher just in case of a LAP than a consumer credit for constant reason, noted higher than.
4. Tenure of loan- a consumer credit will be granted for up to thirty years whereas a LAP is mostly not granted for a tenure surpassing fifteen years by most of the banks/FIs.
5. Tax exemption- the tax deductions beneath sections twenty four (for interest) and 80C (for principal) area unit offered just in case of a consumer credit solely. These deductions don’t seem to be offered just in case of a LAP. (However, if the LAP was taken for business purpose, the deduction of interest will be availed beneath the pinnacle ‘income from business and profession’ however the deduction of principal quantity of LAP isn’t offered in any case.)
6. Restrictions- the provisions of ‘home loan’ area unit terribly relaxed whereas provisions of LAP area unit tight.
7. payment charges- payment charges area unit waived just in case of payment of a consumer credit as per run directions, whereas such charges area unit typically obligatory by banks just in case of payment of a LAP.
8. Priority sector lending- home loans area unit thought-about beneath ‘priority sector lending’ as per run norms whereas LAP isn’t thought-about beneath ‘priority sector’ (However, if LAP was availed for MSME business entity or another purpose classified as a priority sector disposition, constant are classified beneath ‘priority sector’)
9. Monitoring- banks undertake strict observation on correct employment of a consumer credit whereas the recipient is liberal to utilize the return of a LAP for any purpose apart from gambling, stock exchange investments, speculative business etc.
10. Nature of property- a consumer credit shall continuously be granted to buy or construct solely a ‘residential property’ whereas a LAP will be granted against a residential, business or industrial property.
I hope, currently you’ll be a lot of assured in addressing your shoppers and properly ascertaining whether or not he’s in want of a ‘home loan’ or a ‘LAP’