Home loans and loans against property may seem similar, but they cater to entirely different financial scenarios. Whether you’re a first-time homebuyer or a property owner needing liquidity, understanding the nuances—like end-use restrictions, collateral requirements, and tax benefits—is crucial. Let’s explore the differences.
Home Loan vs. Loan Against Property
When it comes to borrowing money for your property or other financial needs, there are different types of loans available. Two common options are Home Loans and Loan Against Property (LAP). Below, we’ll break down the key differences between the two:
| Parameter | Home Loan | Loan Against Property (LAP) |
|---|---|---|
| Definition | A loan to buy, construct, or renovate a house. | A loan where you pledge your property (residential or commercial) as collateral. |
| Purpose | Used solely for buying, constructing, or renovating a home. | Flexible use – can be used for personal or business needs like weddings, medical expenses, or expanding a business. |
| Loan-to-Value (LTV) Ratio | 80-90% of the property value. | 60-70% of the property value. |
| Eligibility Criteria | Proof of property purchase or approval for construction. | Proof of ownership of the property being used as collateral. |
| Interest Rate | Starting at 8.10%-9.5% per annum (affordable). | Starting at 10.5%-10.95% per annum (higher than home loan). |
| Loan Amount | Depends on the value of the property. | Depends on the value of the property used as collateral. |
| Tenure | Up to 30 years. | Up to 20 years. |
| Top-up Facility | Available if eligible. | Available if eligible. |
| Documentation | KYC details, income proof, property details for purchase. | KYC details, income proof, property papers for collateral. |
| Tax Benefits | Tax deductions on principal repayment (up to ₹1.5 lakh) and interest repayment (up to ₹2 lakh). | No tax benefits, but interest may be claimed as a business expense if used for business purposes. |
| Usage | For buying, constructing, or renovating a home. | For various personal or business financial needs. |
Suggested Read: Personal Loan vs. LAP
When Should You Consider a Home Loan?
A home loan is the best option when:
- You are looking to purchase a new home, construct a house, or renovate an existing one.
- You want to take advantage of the lower interest rates and longer repayment tenures.
- You are looking to claim tax deductions on principal and interest payments
Suggested Read: Home Loan Interest Rates Post RBI Repo Rate Cut 2025
When Should You Consider a Loan Against Property (LAP)?
A Loan Against Property is the ideal choice when:
- You require a larger loan amount, but do not want to sell your property.
- You already own a property and need funds for personal or business purposes.
- You need greater flexibility in how the loan amount is used.
Suggested Read: Loan Against LIC Policy
Home Loan Interest Rates 2025
| Bank | Up to Rs. 30 Lakh | Above Rs. 30 Lakh to Rs. 75 Lakh | Above Rs. 75 Lakh |
|---|---|---|---|
| SBI Bank | 8.50% p.a. onwards | 8.5% p.a. onwards | 8.50% p.a. onwards |
| HDFC Bank | 8.75% p.a. onwards | 8.75% p.a. onwards | 8.75% p.a. onwards |
| LIC Bank | 8.50% – 10.35% p.a. | 8.50% – 10.55% p.a. | 8.50% – 10.75% p.a. |
| ICICI Bank | 8.75% p.a. onwards | 8.75% p.a. onwards | 8.75% p.a. onwards |
| Kotak Mahindra Bank | 8.75% p.a. onwards | 8.75% p.a. onwards | 8.75% p.a. onwards |
| Punjab National Bank | 8.50% – 11.05% p.a. | 8.50% – 11.05% p.a. | 8.50% – 11.05% p.a. |
| Bank Of Baroda | 8.40% – 10.65% p.a. | 8.40% – 10.65% p.a. | 8.40% – 10.90% p.a. |
| Bajaj Housing Finance | 8.50% p.a. onwards | 8.50% p.a. onwards | 8.50% p.a. onwards |
| Axis Bank | 8.75%-10.30% p.a. | 8.75%-10.30% p.a. | 8.75%-10.30% p.a. |
| Bank of India | 8.40% p.a onwards | 8.40% p.a onwards | 8.40% p.a onwards |
| TATA Capital | 8.75% p.a. onwards | 8.75% p.a. onwards | 8.75% p.a. onwards |
Also Read: Lowest Interest Rate Home Loans in India 2025
Loan Against Property Interest Rates 2025
| Banks/ NBFCs | Rate of Interest | Maximum Loan Amount |
|---|---|---|
| SBI | 10.60% p.a. – 11.30% p.a. | Rs. 7.5 Crore |
| HDFC | 9.50% p.a. – 11.00% p.a. | 65% of the market value of the property |
| IDFC | 9.25% p.a. onwards | 50% – 70% of the market value of the property |
| Tata Capital | 14.25% p.a. onwards | Depending on the market value of the property |
| Axis Bank | 10.50% p.a. – 10.90% p.a. | Rs. 5 Crore |
| Kotak Mahindra Bank | 9.50% p.a. onwards | Rs. 5 Crore |
| Bank of India | 10.10% p.a. Per lakh | Rs. 5 Crore |
| LIC Housing Finance | 9.70% p.a. – 11.55% p.a. | Rs. 2 lakhs onwards |
| PNB Housing Finance | 9.24% p.a. – 12.75% p.a. | 70% of the market value of the property |
| ICICI Bank | 10.85% p.a. – 12.50% p.a. | 75% of the market value of the property |
Suggested Read: Loan Against Property Tax Benefits
Conclusion
Buying a home is a big step. Getting a home loan can be hard, but we make it easy. Choosing Credit Dharma for your home loan simplifies this process. We offer expert advice and personalized assistance to make everything hassle-free. You’ll receive timely updates on your loan application and disbursement progress.
From the initial application to the final disbursement, we provide comprehensive support. Enjoy clear and honest communication at every stage, with no hidden surprises.
Frequently Asked Questions
Yes, a loan against property (LAP) can be used for a wide range of personal and business purposes, such as funding a wedding, medical expenses, education, debt consolidation, or even expanding a business. Unlike home loans, there are no specific restrictions on how the funds can be used.
Home loans generally come with longer tenures of up to 30 years, which makes repayment more manageable with lower monthly EMIs. In contrast, loans against property typically have shorter tenures, ranging from 15 to 20 years, which may result in higher EMIs due to the reduced repayment period.
With a home loan, you can typically borrow up to 80-90% of the property’s value, depending on the lender’s terms. For a loan against property, the loan amount is generally up to 60-70% of the property’s market value, as it is based on the value of the existing property you own.
HDFC Home Loan
SBI Home Loan
