|Home Loan||Personal Loan|
|Rate of Interest||Usually Low||Usually High|
|Principal Amount||Maximum of up to Rs. 10 crores||Maximum of up to Rs. 25 lacs|
|Repayment Tenure||Up to 30 years||Up to 60 months|
|Penalty||Seizing of collateral by the lender||Legal Action/ Low Credit Score|
A home loan or a house loan is an amount of money that is borrowed by an individual from a bank or any financial institution to buy/construct a house. Home loans have either variable or fixed interest rates. The individual must pay back the borrowed amount along with the interest charged in monthly installments throughout the loan repayment tenure. The repayment tenure can vary depending on various factors associated with the loan. A home loan is also a secured loan. It means the borrower will have to submit collateral. In-home loans, the lender usually uses the borrower’s home as collateral. And hence, if the borrower does not pay the EMIs and becomes a defaulter, then the lender can seize his house and sell it to recover the loan amount.
A personal loan is an amount of money that can be borrowed by an individual from a bank or any lender for satisfying expenses involving travel needs, medical emergencies, house renovation, shopping household items, etc. A personal loan is also an unsecured loan. It means the borrower does not have to submit any collateral or security to get this loan. The borrower can repay the loan amount by paying for it in monthly installments. The monthly EMI also includes the interest amount charged by the lender or the bank. Personal loans can also be used to consolidate other debts.
As already explained above, an individual can take a house loan to buy a house and a personal loan for various types of expenses. Though the debt for both can be resolved by paying monthly EMIs, there are major differences between the two types of loans.
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Rate of interest
Now that you know the differences between a home loan and a personal loan, you can take a decision accordingly and apply for one. If you already have a home loan running and you need more money, then you can opt for a top-up home loan too. If you wish to purchase household items or furniture, then you can opt for a personal loan. Most importantly, ensure that your loan repayments are made on time to avoid penalties.
Home loans and personal loans have their own purposes. If you are looking to buy a house, a home loan is the best for you. But if you need a loan to fulfill small goals, a personal loan is a great option. Home loans mostly are for bigger amounts and have longer tenures as compared to personal loans.
Personal loans generally do not have tenures that last up to 15 years. They are mostly 5-7 years long, depending on the lender.
Personal loans are flexible and the funds can be used for a variety of things. Thus, you can use it to buy property, but it won’t be a good financial decision given the short tenure and high interest rates of personal loans.
Yes, you can use the funds from a personal loan to pay a downpayment for a property.
Home loans are used for buying property, like a house, flat, or land. They may also be taken for building a house on a piece of land or for home renovation. They in general have a long tenure and also involve a lot of documentation.
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