Secured loan against property vs personal loan: Which is better

Both loans give access to funds. Only one asks for a house to back it up.

A secured loan against property is built for bigger needs, longer horizons, and lower EMIs. A personal loan is the sprinter that wins the speed round but tires the wallet faster. If the goal is to choose with clarity, line up the basics first, then look at the fine print that actually moves the EMI and the total interest outgo.

What is a Secured Loan Against Property?

A secured loan against property (LAP), also called a home loan against property, lets you pledge residential or commercial property and borrow a portion of its market value, called the loan-to-value ratio.
These loans usually have lower interest rates than unsecured credit, longer repayment terms (often 15–20 years), and higher loan amounts, depending on the property valuation and your eligibility.
Most lenders fund about 50% to 70% of the property’s value, sometimes up to around 75% depending on their policy and the valuation.

What is a Personal Loan?

A personal loan is unsecured credit issued on the strength of income, bureau score, employer profile, and existing obligations, with no collateral and faster approvals.
Tenures are shorter, usually one to seven years, and the interest rate is higher to compensate for risk and the absence of security.
In 2025, lenders have tightened assessment on unsecured loans, including stricter income to EMI thresholds, which can reduce eligibility for overleveraged profiles.

Secured Loan Against Property vs Personal Loan

• Interest rate: LAP often starts lower than personal loans, given collateral support, translating into lower EMI per lakh over the same tenure.
• Loan amount: LAP can scale to a larger ticket size linked to property value, while personal loans usually cap out much lower based on income and policy.
• Tenure: LAP stretches to long tenures, frequently up to 15 to 20 years, while personal loans are typically under 7 years.
• Speed and documentation: Personal loans are faster with lean paperwork. LAP requires valuation, legal checks, and more documentation, so timelines are longer.
• Asset risk: LAP involves a mortgage. Default risk property. Personal loans risk credit score and future borrowing capacity but not pledged property.

How lenders size the Loan Against House

Lenders work backwards from property valuation and internal LTV limits. Many mainstream products indicate eligibility up to about 65 to 75 per cent of market value, subject to income assessment and title clarity.
Final sanction is also based on repayment ability. With high property value, poor income or poor documentation can restrict the sanction far below the headline LTV.

What changed in Unsecured Lending in 2025

The regulators advocated stricter underwriting in unsecured consumer loans, including capping total EMIs to a specified percentage of income and increasing capital requirements of lenders on unsecured books.
Practical outcome. If existing EMIs already consume a big chunk of income, personal loan approvals may reduce in size or get priced higher, while LAP may still pass because of collateral and longer tenure, smoothing EMIs.

Interest Rate and Total Cost (The Part People Overlook)

Rate times tenure is only half the story. The real driver of outgo is total interest paid over the full term. A lower LAP rate over 15 years can still rack up more total interest than a higher personal loan rate over 5 years if the borrower never prepays.
Sensible play. Use the LAP to cut EMI stress but prepay aggressively when cash flows improve to reduce the total interest bite. For personal loans, keep tenure tight if cash flow allows to save interest.

When a Secured Loan Against Property is Usually Better?

• Funding a large, planned spend, such as business expansion, debt consolidation at a lower rate, or higher education, where long tenure is a feature, not a bug.
• When income is stable, documentation is strong, and the priority is affordability of EMI, not instant disbursal.
• When the property title is clean, valuation supports the ticket size, and the borrower accepts the mortgage risk.

When is a Personal Loan the smarter call?

• Short-term needs, smaller ticket size, and the need for speed with minimal paperwork and no collateral.
• When the borrower does not want to encumber a property or cannot meet LAP documentation, valuation, or title requirements.
• When prepayment within a few years is expected, the total interest will be limited by the short tenure despite a higher rate.

What to check before a Secured Loan Against Property

• Title and encumbrance: Ensure the property has a clear title and no undisclosed encumbrances. Lenders run legal and technical checks, and any gaps delay or reduce the sanction.
• Valuation reality: Be conservative on expected valuation and LTV. Final eligibility depends on lender valuation, not notional market quotes.
• Charges and terms: Look at processing fees, legal and valuation fees, prepayment conditions, part prepay rules, and whether floating rate prepayments are charge-free per lender policy.

What to check before a Personal Loan?

• Debt-to-income: Keep total EMIs within half of the monthly income to avoid rejection under 2025 norms and to preserve cash flow resilience.
• Pricing and fees: Compare annual percentage cost, not just the sticker rate. Consider processing fee, insurance, and prepayment or foreclosure rules.
• Tenure discipline: Match tenure to cash flow visibility. Shorter is cheaper in total interest, but do not starve essential expenses to chase a lower total outgo.

Representative market ranges in 2025

• LAP interest range commonly advertised from about 9 per cent to 12 per cent per annum with tenures up to 15 to 20 years, subject to eligibility and risk grade.
• Personal loan rates often start near 10 per cent to 12 per cent per annum for top profiles and go much higher for mid-tier risk, with tenure typically 1 to 7 years.
• Public sector and large private banks publish LAP product features such as eligibility up to 65 to 70 per cent of market value and loan amounts linked to location and property type.

Secured Loan Against Property vs Personal Loan

Who Should Choose What?

Choose a secured loan against a house when the requirement is large, the need is planned, and cash flows benefit from a longer tenure with a lower EMI, with full awareness of mortgage risk.
Choose a personal loan when speed and simplicity trump size, documentation is light, and the plan is to retire the loan quickly to contain total interest.
For many borrowers, a blended strategy works. Use LAP to refinance high-cost debt and reduce EMI pressure, then prepay with surplus cash to cut total interest, while keeping small short-term needs on short-term personal loans only if necessary.

Conclusion

There is no universal winner. A secured loan against property optimises cost and capacity but slows the process and ties the decision to the property. A personal loan optimises speed and simplicity but tests the budget with a higher rate and shorter tenure.
If the goal is to compare credible offers across lenders without drowning in jargon, Dealplexus is the finance supermarket that helps match the loan type to the use case, line up costs transparently, and keep the decision anchored to repayment capacity and risk tolerance.