Magnetic nanoparticles (MNPs) have captivated the scientific community towards biomedical applications owing to their numerous distinctive physio-chemical properties. In this work, cobalt ferrite (CFNPs) and iron oxide nanoparticles (IONPs) were synthesized using the thermal decomposition method and then functionalized with polyacrylic acid (PAA) for aqueous dispersion. Associated techniques, namely TEM, FESEM, DLS, XRD, and VSM, were used to characterize the synthesized nanoparticles. We also investigated the light-induced and magnetic-field-induced hyperthermia properties of the PAA-functionalized MNPs. It was found that the PAA-CFNPs show a high specific absorption rate (SAR) compared with the PAA-IONPs. Since blood plasma is essential for the delivery and targeting of drugs, studying biological interactions is crucial for effective therapeutic use. Therefore, we performed physical and in silico studies to probe into the mechanistic interaction of CFNPs and IONPs with human hemoglobin. From these studies, we inferred the successful binding between the nanoparticles and protein. Preliminary in vitro cytocompatibility and photothermal toxicity studies in breast cancer (MCF-7) cells treated with the nanoparticles revealed a low dark toxicity and significant laser-induced photothermal toxicity.