You need ₹20 lakh. You own a flat. You could take an unsecured personal loan at around 11-14%, or borrow against the property at 9-10.5%. The cheaper option is not automatically the right one.
Side by side
- Rate. Personal loan roughly 10.5-18% depending on your profile. Loan against property roughly 9-11%. On ₹20 lakh over 10 years that difference is several lakhs of interest.
- Amount. Personal loans rarely exceed ₹40 lakh and usually stop well below. LAP scales with the property — 60-70% of market value.
- Tenure. Personal loan 1-6 years. LAP up to 15 years, which is what makes large amounts affordable monthly.
- Speed. Personal loan can disburse in 24-72 hours. LAP takes two to four weeks — valuation, legal check on the title, mortgage creation.
- What you risk. Personal loan: your credit record. LAP: the property itself.
When the personal loan is the better answer
When the amount is modest and the need is short-lived. A ₹5 lakh medical bill, a wedding, three months of business cash flow. Paying more interest on a small sum for a short period is a fair price for not encumbering your home.
It is also the right call when speed genuinely decides the outcome. A hospital admission does not wait three weeks for a valuation report.
When borrowing against property makes sense
Large amounts over long periods, for something durable. Funding a business expansion, a child’s overseas education, consolidating expensive debt into one cheaper EMI. If you are borrowing ₹30 lakh over 12 years, the rate difference compounds into real money.
One condition: the repayment should not depend on the thing you are borrowing for succeeding. Mortgaging your home to fund a venture that may not work is how families lose houses.
The consolidation case
Someone paying ₹18 lakh across four credit cards and two personal loans at 16-36% can often refinance the lot against property at around 10%. The EMI drops sharply. But the discipline has to change too — clearing cards and then filling them again leaves you with the old debt plus a mortgage.
The middle option people forget
An overdraft against property. You get a sanctioned limit, draw only what you need, and pay interest only on the drawn amount. For lumpy business requirements it is usually cheaper than a term loan, because you are not paying for money that is sitting idle.
Compare the details on our personal loan and loan against property pages. If you would rather have someone work through which one fits, send us the numbers.
Send us your details and an advisor calls back within 24 working hours — no obligation.
