Understanding the difference between a home loan vs a personal loan can help you decide which among these two credit facilities is more suitable for you — particularly when it comes to purchasing or constructing your own home.
To understand the impact that these two kinds of loans have, it is important to first take a look at what they are in detail. So, let’s begin with a personal loan.
That said, there are a few lenders who offer secured personal loans as well. Such kinds of loans tend to typically carry lower rates of interest than unsecured personal loans.
Personal loans are highly popular among borrowers looking for emergency funds without the burden of having to offer a collateral. Aside from this benefit, there are also various other advantages that a personal loan offers. Here’s a quick look at some of the top benefits that you get to enjoy by availing this kind of loan.
Apart from zero collateral requirements, one of the other major advantages of a personal loan is that you can use the funds as you see fit. As a matter of fact, you can use the loan amount for a vacation, for purchasing a high-end gadget, to pay for your child’s education or marriage, or maybe even for renovating your house.
Another benefit of personal loans is that the application process is very simple. Today, it can be completed within just a few minutes in most cases. Most lenders even allow you to apply for the loan online, through a paperless process. That’s not all. The loan approval and disbursal process is also fairly quick and is usually done within 24 hours from the date of submission of the application.
Since a personal loan is unsecured in nature, the eligibility criteria tends to be quite relaxed. As long as you have a good enough credit score and a stable source of income, you will generally qualify for this kind of a loan. The documents that you’re required to submit to avail the loan are also very minimal.
Before we get further into the home and personal loan comparison, let’s quickly take a look at what a home loan is.
A home loan comes with a plethora of different advantages. Here’s a quick overview of some of the key benefits.
Since home loans are secured borrowings in nature, the risk that the lender takes on is reduced significantly. Because of this, you’re more likely to get very attractive and favorable interest rates compared to other types of loans.
By availing a home loan, you stand to gain plenty of tax benefits. Under section 80C of the Income Tax Act, 1961, you can claim the principal amount of the home loan as a deduction from your total taxable income to the tune of ₹1.5 lakhs in a financial year. That’s not all. You can claim the interest portion of the loan as deduction under section 24b of the Income Tax Act as well. If the house property is self-occupied, this deduction is capped at ₹2 lakhs. If the property is let out, there is no limit on the interest component that is deductible.
One of the many advantages of getting a home loan is that the repayment tenure associated with it is typically longer. Depending on the lender, the tenures can be as long as 25 to 30 years too. When you opt a longer repayment tenure, it effectively brings down the monthly EMIs that you would have to pay towards the loan. This, in turn, can help reduce your immediate financial burden each month.
People generally tend to get confused between home loans and loans against property. However, when you compare a home loan vs loan against property, you’ll better understand how they’re quite different from one another.
Let’s start with a home loan. As you know already, a home loan is used to purchase, buy, or renovate a house.
A loan against property, on the other hand, is a loan that you can get by pledging a property that you already own. This collateral can be a house property or even a piece of land. Also, the loan amount that you receive is usually free from any restrictions, much like a personal loan. This effectively means that you can use the funds to meet a wide range of your monetary requirements — and not just to fund the purchase or construction of a house.
Now that you’ve gotten a comprehensive overview both kinds of loans, let’s take a closer look at the differences between home loan and personal loan. The table below should give you a detailed understanding of how these two loans differ from each other.
Going through the above table should have given you a clear view on the personal loan vs home loan debate. If you’re still unsure of which one is better for your needs, here’s something that can help. Although both types of credit facilities have their own set of advantages, opting for a personal loan may make more sense if you don’t have an asset to pledge as collateral. Also, you could consider getting a personal loan if you wish to use the funds as you see fit.
Fi Money provides instant loans that arrive directly in your savings account. These are pre-approved personal loans made available to select users with good credit scores. On Fi, this process is 100% paperless, and the loans are provided at competitive interest rates — where each user remains in control with complete visibility of all details. Plus, you can avoid EMI late fees by setting up automatic in-app payments. Our licensed partner bank assigns an eligible loan amount to each user (up to ₹5 lakh).
A personal loan is an unsecured credit facility that banks and NBFCs offer. On the other hand, a home equity loan is offered by financial institutions against the accumulated equity on a house.
The equity on a house can be calculated by reducing the total outstanding home loan amount (if any) from the current market value of the house. Since a home equity loan is a secured loan, you would have to pledge your house as a collateral to avail it.
No. A personal loan is vastly different from a home loan. The first point of difference is with regard to the nature of the loan — personal loans are usually unsecured, whereas home loans are generally secured borrowings where you pledge your house as a collateral. And secondly, the funds borrowed via a personal loan can be used as you see fit, whereas a home loan can only be used to purchase, construct, or sometimes to renovate a house.
A housing loan is a type of secured loan, where a house is pledged as a collateral with a financial institution to secure the loan. In the event of default in repayment of the loan, the lender will sell the house pledged as collateral to recover the unpaid dues.