When you need urgent funds in India, two of the most common financing options are Personal Loans (PL) and Loan Against Property (LAP). Both offer quick access to money but work very differently in terms of interest rates, collateral, tenure, eligibility, risks, and processing time.
In this guide, you’ll learn the exact differences, advantages, disadvantages, real-life examples, and how to choose the right loan based on your financial situation.
What Is a Personal Loan?
A personal loan is an unsecured loan — you don’t need to provide any collateral. Banks lend based on your income, credit score, and repayment history.
- Best for: Small to medium urgent needs (₹50,000 – ₹25 lakh)
- Tenure: 1–5 years
- Approval time: 24–72 hours
- Interest rate: 10.5%–24% per annum
What Is a Loan Against Property (LAP)?
LAP is a secured loan where you pledge residential or commercial property as collateral. Because the risk is lower for banks, interest rates are lower and tenures are longer.
- Best for: High-value needs (₹10 lakh – ₹10 crore)
- Tenure: 5–15 years
- Approval time: 5–15 days
- Interest rate: 9%–14% per annum
Personal Loan vs Loan Against Property: Comparison Table (2025)
| Feature | Personal Loan | Loan Against Property (LAP) |
| Type of Loan | Unsecured | Secured (property pledged) |
| Interest Rate | 10.5%–24% | 9%–14% |
| Loan Amount | ₹50,000 – ₹25 lakh | ₹10 lakh – ₹10 crore |
| Tenure | 1–5 years | 5–15 years |
| Processing Time | 24–72 hours | 5–15 days |
| Required Documents | Basic KYC, salary slips, bank statements | Property papers + PL documents |
| Risk | No risk to assets | Property may be auctioned if default |
| Eligibility | Income & credit score | Income + property value |
| Processing Fees | 1%–4% | 1%–3% |
| Best For | Small urgent expenses | High-value long-term needs |
| Tax Benefits | No | Yes, if used for business or renovation (Sec 24B) |
Advantages & Disadvantages
✔ Personal Loan — Pros
- No collateral needed
- Instant approval
- Minimal paperwork
- Flexible use (medical, travel, etc.)
✘ Personal Loan — Cons
- Higher interest rates
- Lower loan amount
- Short tenure = higher EMIs
✔ Loan Against Property — Pros
- Low interest rate
- High loan amount
- Long repayment tenure
- Can use for business, education, expansion, etc.
✘ Loan Against Property — Cons
- Property at risk
- Longer processing time
- High documentation
- Legal + valuation charges
Interest Rate Comparison (2025)
| Lender Type | Personal Loan | LAP |
| Top Banks | 10.5%–18% | 8.9%–12.5% |
| Private Banks | 12%–24% | 9.5%–14% |
| NBFCs | 14%–28% | 10%–16% |
Eligibility Requirements
Personal Loan Eligibility
- Age: 21–58 years
- Salary: ₹20,000–₹30,000/month minimum
- CIBIL score: 700+
- Stable job (1–2 years)
LAP Eligibility
- Age: 25–65 years
- Stable income source
- Clear ownership of property
- Property valuation meets loan criteria
- CIBIL score: 650+
Documents Needed
Personal Loan
- Aadhaar/PAN
- Address proof
- 3–6 months salary slips
- Last 6 months’ bank statements
Loan Against Property
- All above documents
- Property documents:
- Title deed
- Registration certificate
- Electricity bill
- Tax receipts
- Bank may conduct legal + valuation checks
Real-Life Example: Which One Should You Choose?
Example 1: Akash (Needs ₹4 lakh for medical emergency)
- Needs money in 1 day
- Doesn’t want to risk property
✔ Best Option: Personal Loan
Example 2: Priya (Needs ₹40 lakh to expand her business)
- Wants low EMI
- Ready to give property as collateral
✔ Best Option: Loan Against Property
Example 3: Ramesh (Has low credit score 620 but owns a shop)
- PL rejection chances high
✔ LAP gives better approval chances
Example 4: Sanjay (Wants ₹10 lakh for child’s wedding)
- Wants longer EMI tenure
✔ LAP is better (lower EMI)
Which Loan Is Right for You? — Quick Decision Guide
| Your Situation | Recommended Loan |
| Need funds urgently | Personal Loan |
| Large amount needed (₹20 lakh+) | LAP |
| Don’t want to risk property | Personal Loan |
| Want low EMI and long tenure | LAP |
| Low credit score but own property | LAP |
| Short-term need | Personal Loan |
| Business expansion | LAP |
How to Reduce Loan Interest Rates
For Personal Loan
- Improve credit score to 750+
- Choose shorter tenure
- Apply with salary account bank
- Avoid multiple loan applications
For LAP
- Keep property papers clean
- Choose public sector banks for lower rates
- Negotiate after valuation report
- Reduce loan-to-value ratio (LTV)
FAQs
- Which is cheaper — personal loan or loan against property?
LAP is cheaper due to collateral. Interest rates are 9%–14%, compared to 10.5%–24% for personal loans.
- Which has faster approval?
Personal loan — usually 24–72 hours.
- Is LAP risky?
Yes. If you fail to repay, the bank can auction your property.
- What is the maximum LTV for LAP?
Banks generally offer 50%–70% of property value.
- Can I use LAP money for business?
Yes. LAP is often preferred by MSMEs for expansion.
- Which loan is better for bad credit?
LAP has higher approval chances if you have a property.
- Are there tax benefits?
Tax benefits apply for LAP only if the loan is used for home renovation or business purposes.
Final Verdict
Choose Personal Loan if you want:
- Speed
- No collateral
- Small amount
- Short-term borrowing
Choose Loan Against Property if you want:
- Low EMI
- High loan amount
- Long tenure
- Better approval chances
Both loans are useful — the right choice depends on urgency, loan size, financial stability, and whether you’re comfortable pledging your property.
