Commercial Property Loans vs. Loan against Property: Which One to Choose?

By: Homeloan0 comments

It is a challenging, tedious, and time-consuming task to start, run, and sustain a business.  There are select credit tools available to run a business smoothly; although, funding is an important factor.

 Commercial property loans are provided by lenders to support the establishment and operation of businesses.  Although business owners have an alternative option to address their financial needs with loans against property they offer competitive interest rates providing substantial amounts, potentially reaching up to Rs.5 crore or more, based on eligibility.  Thus a loan against property is an attractive choice for business expenses.

 When it comes to choosing between commercial property loans vs loan against property, you need to consider what type of loan suits your need better and in the long run which loan will be the best.  Let us check out the details about both loans mentioned below to help get a clearer insight.

 A loan against property is a type of loan granted against a property that acts as collateral applying to both residential and commercial properties.  The primary advantage that loans against property offer is they are secured where lenders are allowed to offer more competitive interest rates that are most often lower compared to commercial property loans.  Also, the funds obtained through a loan against property can be used to cover a wide range of expenses.

A commercial property loan on the other hand is a collateral-free and unsecured loan that enables borrowers to access funds without the requirement of providing any security.  The obtained funds have to be utilized for purposes such as expanding operations, acquiring tools, equipment and other machinery, or enhancing working capital, among other business-related requirements.

 Below are the differences between a loan against property and a commercial property loan:

 As commercial property loans are granted without the need for collateral; hence, they are considered to be unsecured loans.  Thus, as there is a risk factor involved; hence, lenders end up charging a high rate of interest on these loans.  A loan against property however secured loan that could be availed at a more competitive interest rate compared to a commercial property loan.

 Due to the unsecured nature of commercial property loans, lenders typically hesitate to provide hefty amounts.  On the contrary, a loan against property offers sizable sanctions based on its secured nature.

 The tenor for a commercial property loan is typically shorter compared to that of a loan against property, with commercial property loan typically having a repayment duration of within 7 years from the date of disbursal, unlike a loan against property that allows for a repayment duration of up to 18 years.

 A loan against property offers the flexibility to cover various expenses, contrary to commercial property loans that are specifically designed to accomplish business-related costs.  

 If you need funding to launch a new business or to grow an existing business, a commercial property loan is not the only available alternative.  In fact, if you require a considerable loan amount that you could repay over an extended tenor, it is always good to opt for a loan against property as this choice is more advantageous compared to obtaining a commercial property loan.

 To conclude; a loan against property has an edge over commercial property loans, as it features a large fund amount, having a low-interest rate, with an extended repayment tenure.  Commercial property loans are suitable for a relatively smaller loan amount with short repayment duration.

For more details contact our branch office at


CRV Tower, 46/5, 2nd floor, 8th main, near MES college, Malleshwaram, 

Bangalore – 560055

Phone:  +91 9844141122

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