Knowledge Series of Experts

What to opt for-LAP or Business Loan?

What to opt for-LAP or Business Loan?

Lending options in today’s time have grown vast in terms of numbers and it has become easier for borrowers to choose the option that best suits their requirements. Planned and unplanned expenses are something that can be faced anytime and keeping this in mind the financiers have curated the lending options in particular. This article will specifically cater to business loan and loan against property.

Loan against Property

Loan against property, just like the name suggests, is a kind of loan that can be availed by mortgaging the property the applicant owns. The approval of the loan is at the discretion of the financial authority or loan provider only once the evaluation of the property is done. Generally financers offer 60%- 65% of the property value as loan

It is considered as a secured loan since it is backed up by an asset and hence Loan against property carries a lower interest rate.

Loan against property can be used for any personal or business credit need

The applicant needs to keep in mind that he can utilise the money only for the purpose that he has mentioned in the application and which has been approved by the bank at the time of sanctioning of the loan

Business Loan

Business loans are sanctioned for the purpose of expansion or setting up of new businesses. These kinds of loans are unsecured loans because they are not backed by an asset and thus there is no security for the lender, which implies that the interest rates are on the higher side.  Depending on the requirement of the applicant, the type of business loan can be selected.

LAP vs Business Loans- The basic differences highlighted

No. Loan against Property Business Loan
1 The applicant should have a property to mortgage (can be residential or commercial) to get the loan approved. No requirement of property for mortgaging.
2 Can be availed in case of any personal reasons, as well as business requirements such as business expansion, kid’s wedding expenses, home construction, kid / self-education etc. Can only be availed for purposes of business expansion or a new set up such as working capital management, inventory management, equipment purchasing etc.  
3 Since the interest rates are lower, the monthly EMI is also lesser Expensive and hence higher EMIs
4 The loan tenor is higher (up to 15 years) Loan tenor is lower (up to 3years)
5 The value of loan amount is higher (dependent on property price) and can go up to Rs 15 Cr It is lower and can typically go from 50 lacs to 1 Cr

On a concluding note, it is important to mention that the applicant should thoroughly conduct an analysis of the exact requirements that he/she has and only then move ahead to select which kind of loan to opt for.

Other Related