Loans have become significant financial instruments allowing individuals to meet their aspirations, ranging from medical emergencies, short-term cash flow gaps and building long-term assets like a home. Most financial institutions extend a wide range of financial products, such as personal loans, home loans and more to fulfil varied consumers’ requirements.
Personal loans allow individuals to meet smaller goals, such as funding marriage and vacation, financing a child’s education, etc. On the other hand, the increasing home prices make home loan borrowing necessary. Hence, before opting for the right one, it is essential to understand the difference between a home loan vs personal loan.
To know the difference between home loan and personal loan, refer to the table below:
Differentiating factors |
Home loan |
Personal loan |
Collateral |
A home loan is a secured variant, and lenders consider the borrower’s property as collateral which they plan to purchase |
Personal loans do not require collateral. |
Tenure |
The home loan tenure can range up to 18 years. |
Personal loans are available for a period of up to 5 years. |
Loan quantum |
Often home loans come with a substantial amount. However, the amount will be sanctioned depending on the borrower’s income eligibility. |
Personal loans come with small amounts to meet short-term cash requirements. |
Tax benefits |
Usually, home loans come with a significant tax benefit on both principal and interest payment |
If the borrower chooses to prepay a certain portion of the loan amount, he/she will have no impact on the tax planning. |
Apart from these, another significant difference between these two is the home loan vs personal loan interest rate. The former comes with an affordable interest rate owing to its secured nature, while the latter comes with a higher interest rate.
Here are some notable distinctions between home loan vs personal loan based on certain factors:
Distinguishing factors |
Home loan |
Personal loan |
Type |
Secured |
Unsecured |
Interest rate |
7.70%* onwards |
10.49%* onwards |
Loan amount |
Up to Rs. 15 Crores* |
Up to Rs. 50 Lakhs* |
Processing fee |
Up to 7% of the loan amount |
Up to 4% of the loan amount |
Financial institutions in the country extend home loans to eligible borrowers, helping them to make the home loan down payment and purchase their desired properties without exhausting their savings.
Home loans help individuals in the following ways:
One of the most prevalent kinds of home loans is for acquiring a new or used property. Most financiers offer this kind of loan in varied configurations.
With the help of a home loan, individuals can build a new home rather than purchase a built one.
Financiers also offer home loans for home expansion that involve integrations of additional spaces, renovating existing structures, etc.
This type of financing option does not require any high-end asset as collateral. Instead, it is entirely approved on the basis of the borrower’s creditworthiness and repayment ability.
Here are some of the significant purposes of a personal loan:
With the help of a personal loan, borrowers can fund marriage, meet the necessary wedding expenses, etc., per requirement.
By opting for a personal loan for travel purposes, borrowers can finance their trip expenses in any part of the world.
Also, borrowers can meet necessary medical expenses with the help of personal loans without exhausting their savings.
Besides understanding the difference between home loan vs personal loan, borrowers must know the features and benefits to plan their finances better. Moreover, before opting for any of these financing options, it is essential to assess one’s finance and repayment capacity to avoid complications in the long run.
Home loan is a secured variant and comes at a competitive interest rate compared to other financing options, while a personal loan is an unsecured variant with a higher interest rate. However, these interest rates will vary among lenders. Also, borrowers with higher credit scores can negotiate better rates and loan terms with lenders. So, it is up to the borrower’s discretion which one is suitable for them.
Home loan application can be done through the following steps:
Go to the preferred financial institution’s website.
Go to the application section and furnish personal details such as name, mobile no., PIN Code and occupation details, annual income etc.
Enter the loan amount and repayment tenure as per your suitability.
A representative will get in touch to explain the next steps.