Personal loan
Personal loan

Personal loan apply online, how to check SBI personal loan application status etc., are a few of the most searched queries in context to personal loan on Google. For many, a personal loan is probably the most popular credit option available for meeting financial shortfalls and liquidity mismatches in occasions of immediate financial distress. Being unsecured in nature, personal loan’s approval depends upon factors such as the applicant’s credit score, monthly income, job profile, employer profile and age. 

LAP, on the other hand, is a secured loan backed by collateral, usually in the form of commercial, residential and industrial property. Like personal loans, you are free to use their loan proceeds to finance your home renovation, child’s education/marriage expenses, business expansion, overseas travel or any other personal requirement. Since both loan types serve the same purpose, individuals might face a dilemma in choosing between the 2 options.

To assist you make an informed decision, here is a brief comparison between Personal loans and loans against the property on how they fare against each other. Here, we will even explain why consumers search for queries like personal loan apply online, ways to check SBI personal loan application status etc. 

Processing time

As a personal loan is an unsecured loan, lenders usually judge your application on the basis of your credit score and monthly income, and hence your application may get approved within 2 to 7 days. Thus, those who have submitted their application through the personal loan apply tab on State Bank of India’s site can ensure to check their SBI personal loan application status either by directly calling the bank or checking the status online. 

Conversely, a loan against property takes time as lenders verify all your property related documents before disbursing the loan. They usually undertake a technical study to confirm the ownership of the property and find out its existing market value. Additionally, you are asked to submit various documents supporting your monthly income to judge your repayment capacity. This whole process generally takes anywhere between 15 and 30 days, making a loan against property unsuitable for those seeking quick loan disbursal for meeting their immediate fund mismatches. Thus, those loan applicants in need of instant loans to meet immediate fund mismatches can opt for personal loans as they are disbursed faster than loans against property options. 

Rate of interest

Being secured in nature, the rate of interest of a loan against property is generally lower than a personal loan. This can begin from 8.20% p.a. onwards. In comparison, the interest rate on personal loans can go as high as 24% p.a. The major factor deciding the interest rates in personal loans is your credit score. Applicants with a credit score of 750 and above may get instant loan approval, while those with lower credit scores may not or may avail of a loan at a higher rate of interest. Thus, a loan against property is suitable for those who are denied a good personal loan deal due to low credit score as in the case of loan against the property; lenders do not put much emphasis on the applicant’s credit score for loan approval owing to the loan’s secured nature. 

Loan repayment tenure

In the case of a loan against a property option, the loan repayment tenure can be as high as 20 years, whereas the upper limit for a personal loan is usually around 5 to 6 years, with few of the lenders willing to offer a higher loan repayment tenure of up to 7 years. The longer loan repayment tenure brings down the EMI payouts, which increases the big-ticket loan’s affordability. However, on the flip side, longer tenure leads to higher interest payout.

Loan amount

In the case of a personal loan, your loan amount essentially depends upon your monthly income and your ability to service your loan. However, the loan amount for a loan against a property depends on both the property’s market value and your income. Usually, the loan amount in a loan against a property can go up to 80% of the market value of the property. In the case of a personal loan, the upper limit is usually 40 lakh. Hence, you should consider taking a loan against the property option if you require higher loan disbursal.

Prepayment charges

When you make the prepayment of the personal loan or loan against property, whether, in part or full during the loan tenure, under fixed-rate, a penalty is charged; however, under floating rate, lenders do not charge any prepayment penalty. Usually, prepayment or foreclosure charges for personal loan range anywhere between nil and 5% of the principal outstanding & is permitted only after the completion of a certain period of the loan tenure. However, for a loan against property, a prepayment penalty of up to 2% is charged on the balance amount. Prepaying your personal loan or loan against property tends to save on your interest cost. Therefore, if you are planning to prepay your loan, ensure going for a floating rate as no prepayment penalty is charged. In case if you opt for a fixed rate, choose the lender charging minimal prepayment or foreclosure penalty.  

Bottom line

Though a loan against property is a better choice as compared to a personal loan basis the interest rate, loan tenure & loan amount, the loan falls short in terms of disbursal time. Hence, for those who require borrowing funds at short notice, a personal loan apply route by visiting online financial markets or through SBI is the only viable option. Note that one can check out their SBI personal loan application status by visiting the bank or website online. 

Besides personal loans, such loan applicant’s can even check out loans against credit cards if they require a lower loan amount. Loans against credit cards are disbursed on the same day of a loan application, with their interest rate being almost equal or slightly higher than a personal loan. Their loan repayment tenure can go up to 5 years, which is the same as a personal loan’s repayment tenure. 

Moreover, note that on defaulting your personal loan’s monthly dues, your credit score is pulled down, which makes you ineligible for a future credit card or loan application. In the same way, if you default in repaying your loan against property dues, you may be at a greater risk of losing out your mortgaged property. Thus, you should make sure to evaluate your repayment capacity before opting for any of the loan types.