Human life is surrounded by an uncounted number of expenses including children’s education, buying a home, expanding business, marriage, vacation etc. All the mentioned events are important and require huge funds. A few years ago availing funds was a tedious task, however, today with the availability of various online platforms and lending options you can get funds instantly. There are different types of secured and unsecured loans available today including Loan Against Property (LAP), Home Loan, Personal Loan, Business Loan and others. The funds can be borrowed based on your loan requirements and loan eligibility.
With various options, it becomes difficult to choose the type of loan to serve your needs in a better way. Hence, when opting for your loan you should consider certain factors such as EMI amount, rate of interest, loan tenor, and Loan to Value (LTV). Although, LAP and unsecured loans have their own set of benefits, they have certain differences in their features that may influence your borrowing decision.
Before going further, you should understand how LAP is different from unsecured loans.
What is a Loan against property (LAP) and a Unsecured Loan?
Loan Against Property: LAP is a secured form of loan which is borrowed from a bank or an NBFC. As the name suggests, you have to mortgage your property as collateral to get this type of loan. The funds are provided according to the value of your property that is commonly known as Loan to Value (LTV). The loan is repaid through EMIs for a particular time period at the predetermined rate of interest.
Unsecured Loans: Unlike a secured loan, you are not required to mortgage your property or any other asset with the bank to borrow funds for these types of loan. Unsecured loans include Personal Loan, Business Loan, Loan Against Credit Card, etc. In order to get maximum funds you are required to have sound and reliable financial record.
To help you understand when you should avail a LAP or an unsecured loan, we have summarized some important differences below:
Rate of Interest: At the time of lending funds, banks charge certain rate of interest on loan against property based on your credit history, credit score, income and other factors. The rate of interest for LAP is comparatively much lower than unsecured loans. The minimum rate of interest for LAP is 9% whereas for personal loan it is 10.50%. So, if you have a mortgage able property, it is wiser to choose a LAP.
Loan Tenor: Loan tenor is another factor that affects your borrowing decision. The amount of EMI will be lower if the loan tenor is longer. The maximum loan tenor for a LAP is 25 years. However, loan tenor for unsecured loans is comparatively shorter. Typically it ranges from 1 to 5 years.
Eligibility: Eligibility of the borrower comprises of certain factors including income, documents, CIBIL Score, credit history and age. In case of an unsecured loan, your eligibility mainly depends on your income (Salary or business revenue) whereas the eligibility for a LAP is also derived from property value.
Documents: In case of a LAP, you need to furnish more documents as it involves property, whereas for a unsecured loan the requirement for documents is much lesser.
Summarized details of LAP and Unsecured Business Loan
With these differences in mind, you can assess which option is more suitable for you. Based on the specific situation, either of the loan types could be advantageous. You have to choose a loan based on your requirements, eligibility, and capacity to repay.
Basis of Difference
Unsecured Business Loan
Loan Against Property
Security
No security required
Any of Residential, commercial or industrial property as security is required
Rate of Interest
Ranges between 12.75% to 30%
Ranges between 9% to 20%
Processing Fee
Up to 3.5%
Up to 0.5%
Loan Amount
500 Crores
Up to 15 Crores
Processing Timelines
4 to 10 days
5 to 15 days
Loan Tenor
5 years
25 years
Prepayment Penalty
Zero to 6% after particular period
Nil (Individual borrower)
2-4% (other borrower)
With these differences in mind, you can assess which option is more suitable for you. Based on the specific situation, either of the loan types could be advantageous. You have to choose a loan based on your requirements, eligibility, and capacity to repay.
Updated On Jul 20, 2026
Written By
Written By Reshma RawatAssistant Content ManagerCredit Cards, Credit Score, Personal Loan, Home Loan, etc.
Reshma Rawat is a passionate writer with a decade of experience in writing for a variety of domains (finance, technology, lifestyle, e-commerce, real estate, etc.). Currently, she is working as Assistant Manager - Content @MyMoneyMantra and writes blogs & webpages on financial products (loans, credit cards, insurance, government financial policies, mutual funds, etc.).
