Personal Loan or LAP: Which One is a Better Choice?

A Loan against Property (LAP) is a secured loan that can be sanctioned against any of your properties as collateral. The lender keeps your asset until you repay the loan. However, a personal loan is an unsecured loan. Unlike a LAP, which is primarily offered by conventional financial institutions, personal loans are also provided by modern fintech companies as quick loans online. Here are some other differences between a LAP and a personal loan to help you make an informed choice between them. 

Documentation 

The documentation for a LAP can be lengthy and cumbersome. You need to arrange for all the required property-related documents, submit them and wait for the lender to go through them. There can also be other legalities and formalities. 

However, if you opt for a quick loan online, only some essential documents are needed. Plus, you can upload them online quickly on the lender's personal loan app. The documents are also verified fast, digitally. 

Credit Assessment 

Before providing a loan against property, the lender checks your credit score to assess your creditworthiness. If you don't have a typical credit score or haven't borrowed earlier, your loan request may not be considered. 

However, a leading fintech company that offers quick loans online uses a modern credit rating system called the Social Loan Quotient (SLQ). The SLQ score is calculated using artificial intelligence, smart data analytics and machine learning. It determines your creditworthiness based on unconventional factors like your smartphone metadata and social media footprint besides your KYC compliance, educational qualifications and monthly salary along with your credit score. So, it's easier to qualify for an instant personal loan. 

Disbursal 

The lengthy documentation and credit assessment causes delay in processing, approval and disbursal of a LAP. 

However, once you successfully apply for a personal loan on the app of a fintech company, the loan is disbursed within a few minutes to your bank account. So, you can get quick access to the funds to meet any urgent requirements. 

Loan Amount 

The value of your property used as collateral against a LAP can be very high. The loan amount is usually up to 40-70% of the property value.

If you go for a quick online loan from a fintech company, you can borrow as less as ₹1,000 and up to ₹4,00,000. 

If you require money for smaller expenses, you need not borrow a large amount. So, the amount of a small personal loan would be suitable for you to repay conveniently. 

Tenure 

Loans against property usually come with a tenure of 5-15 years. However, personal loans on apps are available for short tenures like 90, 180, 270, 365 and 540 days. 

So, if you have a small fund requirement, you may find a short term] to repay a loan. Then you can become debt-free sooner. 

A quick loan online is better than a LAP to meet small urgent fund requirements. You can easily repay it, plus your property won't be unnecessarily pledged away for a long term.