Mortgage Loan and Loan against Property- The difference

The most basic question that people in India are always confused about is the difference between Mortgage Loan and loan against Property. Are they the same, or does there is any difference between the two?

The answer is yes. There is a slight difference between Mortgage Loan and loan against Property. Mortgage Loan refers to a giving a security land or home as a deposit to the loan provider, who in turns adds some interest to it, and when you pay back that amount plus interest, your collateral legal documents is given back to you. 

The same procedure goes with Loan against Property, but in this case you can lend any type of property such as residential, commercial or agricultural land for getting cash in exchange. Most of the time, it is seen that the cash you get in exchange of Property is only 70-75% of actual value of the collateral. This surely increases the overhead on the customer to pay loan, since the deal is costlier to loan takers. 

The difference is, Mortgage Loan is only availed in case of purchasing homes. It can be used as an alternative to home loans. A down payment can be done using the mortgage, and remaining amount can be thought of as a Home Loan. On the contrary, Loan against Property can be availed for any purpose, not necessarily taking home. It can be used as secured loans with low interest rates for any personal requirements.

Hence, always make a note of how much property value cash you are getting in exchange of Mortgage Loan or Loan against Property in India.

Improve your Credit Score to avail Personal and Mortgage Loans

Due to lack of awareness, we often don’t pay any attention on our credit accounts while making transactions. The most prominent reasons to have a low credit scores are:

• ·         High Credit Card Balance

• ·         Too many credit accounts linked to your name

• ·         Payments not made on time.

• ·         Current Loans you have, if any.

• ·         Your previous payment history.

In India, there is a separate organization that deals with collecting and maintaining every individual Credit account records known as CIBIL Scores. The Credit Score is taken into account when you want to apply for Credit Cards or Personal Loans. If your score is higher than the prescribed one, you won’t have any problem getting Loans or credit Cards, but if it’s less, you may have a problem.

Here are some ways you could improve your CIBIL score:

1.        Know your weak areas and Improve: Now that you have known about the points that can get you a low credit score, you can improve in those targeted areas.
2.         Paying your Loan Interest on time: Never fail to pay your mortgage loan or personal loan EMI, so that it won’t affect your Credit Score so severely.
    3. Have one credit card: Don’t try to use multiple credit cards, for if your account balance differentiates hugely, you will be in a trouble.

Therefore, it’s important to opt for low interest rates Mortgage Loan, whenever you are in a need. If you have a good credit history, loan providers may offer you best deals on Loan against Property with low processing fees, since your ability to repay will be shown in your credit score report.