A secured loan taken from a finance company and guaranteed by property that is either owned or financed is referred to as a home loan. If you have a high salary, you can acquire the best home loans in the market. Before the sum is accepted, other factors such as repayment capacities and the need for the home loan are taken into account. The debt is repaid in monthly installments (EMIs) at a fixed interest rate over a defined length of time. Personal loan, on the other hand, are unprotected loans provided by a bank without the need for collateral or a real estate collateral.
Because a personal loan is an unsecured loan, the amount granted is likely to be less than that of a home loan, hence personal loans are often used for smaller financial requirements.
Here are some differences between a home loan and a personal loan that you should notice. –
The most major distinction between a personal loan and a home loan is the type of loan. A home loan is given on the basis of collateral. When you take a home loan, the property is determined as collateral, and the bank or lending company can take away the property if the obligation is not paid back. A personal loan is also not secured.
Home loans with terms ranging from five to thirty years are available. Because of the increased loan value, the term of a home loan is longer.
Personal loans, on the other hand, might range from 12 to 60 months in length.
Issued Interest Rates
The interest rate that you are offered is one of the most essential aspects that an applicant considers when applying for a loan. The rate of interest applied on a home mortgage is lower than rates applied on a personal loan since the inherent risk is higher. Because the home loan is secured, your lender may charge you a lower interest rate.
Advantages in terms of taxes
Another thing to keep in mind is that personal loans do not come with any tax benefits. You can deduct up to 1.5 lakh in principal payments from your taxes. You can also deduct up to 2 lakh from your home loan interest payments.
These tax benefits are present for the duration of the home loan. Taking advantage of these tax incentives will not only reduce your tax burden, but it will also make repayment easier.
The Loan’s Processing Time
As previously stated, a personal loan is an unsecured loan. The time taken will be reduced because no protection will be required. They’ll only look at your monthly income and credit score, and your loan application might be approved in as little as a week.
A home loan, on the other hand, typically takes 15 to 30 days to process. This is because the lender will verify the legality of the property-related papers before releasing the loan cash.
The Home Loan interest rate is one of the most important elements to consider when deciding on a loan. You should not, however, limit your search to interest rates and should also consider other factors. The total borrowing cost and tax benefits are two further factors that you cannot afford to overlook. Remember that comparing and contrasting each of your loans with the use of a home loan EMI calculator might be beneficial.