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Personal Loan Vs Home Loan What is the Difference?

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A loan plays an important role in bridging the gap between people and their immediate need for money.

But with different types of loans available, it’s important to make the right choice. For example, if you want to purchase a new television, an instant personal loan is the perfect choice. But if you’re planning to buy a new house, you will need to take a home renovation loan.

Home loan or personal loan, which is better for you? Keep reading to find out.

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What is a Personal Loan?

A personal loan is the money you can borrow from a lender to meet any kind of expenses like travelling, online courses, shopping etc. You don’t have to provide any collateral against these loans because usually they’re unsecured.

What is a Home Loan?

A home loan or house loan is the money you can borrow from a lender to buy a house or property. Since this is a secured loan, you will have to provide collateral against the loan. Usually, lenders keep the house you purchase as security against the loan.

Personal Loan Vs Home Loan: Key Differences

Characteristic	Personal Loan	Home Loan
Loan Amount	Can range between ₹1000 to ₹50 lakhs, depending on the lender	You can get home loans up to ₹15 crores from different banks or NBFCs in India
Interest Rate	Can vary between 8.75% p.a. and 49.5% p.a.	Can vary between 8.75% p.a. and 15% p.a.
Collateral	It depends on whether you’re taking a secured or unsecured loan	The property you purchase using the home loan is considered collateral.
Penalty Charges	Overdue interest and late payment penalty charges	Apart from penalty charges, the lender might seize your collateral
Repayment Period	Up to 60 months	Up to 30 years

Also Read : What is a Personal Loan? Definition, Types & How Do They Work?

Personal Loan Vs Home Loan: Things you Need to Know

There are many differentiating factors between personal loans and home loans. And understanding the key differences can help you choose a loan that fits your needs.

Here is everything you need to know about the two:

Home Loan

1) Collateral

Home loans are secured loans. You have to provide your home as security against the money you borrow. If you’re unable to repay the loan, then the lender can seize the house you provided as security.

2) Loan Amount

Home loans are big-ticket loans which can range anything between ₹20 lakhs to ₹15 crores. The highest possible loan amount depends on the lender.

3) Tenure

Since home loans are big-ticket loans, they have a long repayment tenure. Depending on the lender, you can choose a loan tenure of up to 30 years.

4) EMI Payments

You will have to pay back your home loan in instalments every month in the form of EMIs. Since home loans have a long loan tenure, you need to plan your finances for a longer term.

5) Processing Time

It takes longer to process a home loan as compared to a personal loan due to a longer application process and document requirements. Once your home loan is approved, you would receive the amount between a few days to a few weeks, depending on the lender.

6) Interest Rates

Home loans are secured loans. Because of this, the interest rate charged on them is comparatively lower than personal loans. In India, the interest rate on home loans can start at as low as 8.5% p.a.

Personal Loan

Essential Information About Personal Loans

Collateral

Most personal loans are unsecured loans, meaning you don’t have to provide any assets as security to take a loan.

Loan Amount

Personal loans range between ₹3,000 to ₹50 lakhs. Eligibility depends on credit score, past repayment behaviour, and credit report. Learn more about credit score here.

Tenure

Personal loans typically have shorter repayment tenures ranging from 6 to 60 months, depending on the lender.

EMI Payments

With shorter loan tenures, plan your finances carefully for the short to medium term.

Processing Time

Personal loans are processed quickly. For instant personal loans, application completion and fund transfer can happen instantly. Apply for instant personal loans here.

Want a super-fast loan? With Zype, get approved in less than 60 seconds and receive funds instantly.

Interest Rate

Personal loans are unsecured, so they carry higher interest rates. Rates vary from 8.75% p.a. to 49.5% p.a. based on your credit profile. Learn about unsecured loans here.

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Also Read: Secured vs. Unsecured Loan: What is the Difference?

Personal Loan or Home Loan – Which is Better?

Before choosing between a personal loan and a home loan, it’s important to evaluate your needs. This is because both loans serve very different purposes.

If you want to purchase a house or property, then a home loan is the right choice. You can get a higher loan amount at lower interest rates and EMIs.

But if you want instant access to money, a personal loan is a better option for you. With an easy application, instant approval, and fast disbursal, you can get the money you need very quickly.

Personal Loan or Home Loan: Interest Rates

The interest rate you’re charged on a personal loan depends on your credit score and personal loan repayment history. Between Personal Loan or Home Loan, interest rates offered on home loans are comparatively lower. In India, you can get a home loan starting at just an 8.5% interest rate.

Usually, personal loans are unsecured loans. This is why the interest rates offered on personal loans are higher. In India, you can get a personal loan ranging between 8.75% to 49.5%. Want a personal loan at an affordable interest rate? Download the Zype app and get instant loans starting at just a 1.5% interest rate (per month).

Conclusion

Both these loans have very different loan amounts, interest rates, and processing times.

But now that you know these differences, you can evaluate your requirements to make an informed decision.

Frequently Asked Question

Can We Take Personal Loan For 15 Years?

No, personal loans have a shorter repayment tenure. The maximum number of EMIs on your loan is up to 60 months.

Do I Need Good Credit for Both Personal Loans and Home Loans?

While many lenders offer personal loans and home loans to those customers who are new to credit or have a score below 700, a good credit score can get you a high loan amount at a low-interest rate.

Can You Take a Personal Loan To Pay Down Payment?

Yes, you can. You can use your personal loan anywhere you like because they are usually unsecured loans.

When should I Choose a Home Loan Over a Personal Loan?

If you need money to buy a house or a property, choose a home loan. But if you have money very quickly for things like a down-payment on your house, wedding expenses, education fees, etc. it is better to choose a personal loan.

What Factors Should I Consider When Deciding Between a Personal Loan and a Home Loan?

The most important factor you should consider when deciding between a personal loan and a home loan is the purpose of your loan. Other than that, there are also factors like the interest rate, loan amount, EMIs etc. that you should consider.