Nowadays, financial institutions have eased all the processes for the customer’s financial needs. One of the financial instruments is Loan. It is a financial transaction in which the financial bank or institution lends money to a person for a certain period. A person has to repay this money after a while with some interest rates. The one who lends the money is called lenders and the one who receive are known as borrowers.

You can avail of loans through various financial institutions. It helps you to cover the short-term cash flow gap. Many non-banking financial companies provide loans for the short term as well as for the long term. There are various kinds of loans available in the market which you can avail and you can pay it later in EMIs.

There are two types of loans that we will discuss here today Personal loans and Home loans. When we look at a Personal loan vs  Home loan, we can see Personal loan are a kind of loan that people takes for their personal uses that can be used for any needs like marriage, education, travel, etc. Another type of loan is a Home loan which people take from a financial institution to buy or construct a home.

We will know in detail about Home loans vs personal loans in this article. So, let’s begin.

What is a Home Loan? 

A home loan is a type of loan in which a borrower can avail money to renovate or construct a home from any bank. It helps you fulfill the short comes while building a home. It is a secured loan where the house itself acts as collateral.

The Purpose of a home loan is to buy or construct a home, renovation, and refinancing.

What is a Personal Loan?

In a Personal loan vs home loan, a Personal loan is a loan that the bank provides to the borrower for their personal use. It is given to the person based on their creditworthiness. A personal loan does not need any kind of collateral usually. Collateral refers to the asset you give to the lender in the form of security. The lender keeps it if the borrower fails to repay the loan. The purpose of collateral is to decrease the risk of loss. Personal loans have uses which you can see below.

Uses of Personal Loan

Let’s look at some uses of personal loans when we are knowing of Personal loans vs home loans.

1. Wedding

Marriage is one of the important occasions in an Indian family. People have various needs in the marriage like jewelry, place booking, etc. Various financial institutes offer personal loans which you can take from. The bride and groom can take a personal loan to cover all the wedding expenses. A personal loan might help in making your big day more special.

2. Traveling

People love to travel and it costs a lot. To cover all the travel expenses you can take a personal loan from the bank. It is usually added to the holiday loans. So, you can make your travel more efficient with a personal loan.

3. Pension Loan

 Pensions are an amount of money for retired individuals. Not anyone can apply for this pension under a personal loan.

4. Other Uses

People can avail of personal loans for other uses like consumer durable loans, starting a business, agricultural loans, etc. You can take a personal loan for any of your needs. Financial institutions and many banks provide it with less documentation. Different banks have different terms and conditions to apply for personal loans. 

Home Loan vs Personal Loan in Brief

Let’s look at the different parameters of home loan vs personal loan in brief below-

Various Terms of Home Loan and Personal Loan

When we learn about personal loans vs home loans we need to see various terms come along with it. Let’s look at that

• Collateral

In personal loans vs home loans, we generally hear about collateral. Collateral refers to an asset or property that the borrower has to give as a security to the lender. It serves as a guarantee that the lender can seize and sell in the event of failure of repayment. The purpose of collateral is to reduce the risk for the lender by providing an additional source of repayment. The lender can sell the collateral to recover the outstanding balance if the borrower fails to repay the loan.

• Sum Involved

The term “sum involved” generally refers to the amount of money that is at stake or involved in a particular transaction. It can be used in various contexts like legal disputes, insurance claims, business transactions, or financial agreements.

• Tenure

Tenure is one of the terms you will generally hear when you read about personal loans vs home loans. Tenure refers to the duration or length of time in which the loan is repaid. The tenure of a loan is typically specified in months or years and varies depending on the loan and the agreement. The choice of tenure for a loan can have a significant impact on the monthly repayment amount.

• EMI Payments

EMI stands for Equated Monthly Installment. It is a fixed amount of money that a borrower needs to pay to the lender every month as a repayment of the loan. When you borrow money, the lender calculates the EMI based on factors of loan amount, interest rate, and tenure. The EMI remains constant throughout the loan tenure unless there is a change in the interest rate or the borrower opts for prepayment or foreclosure.

• Processing Time

While we know home loan vs personal loan you might want to know how much time it takes to get the loan which is also known as processing time. The processing time for a loan can vary depending on several factors, including the type of loan, the lender’s policies, and the applicant’s documentation.

• Interest Rates

 Interest rates in home loans vs personal loans are the rate of interest the borrower needs to pay while repaying the loan. In-home loan vs personal loan, the interest rate is the rate charged by the moneylender on the credit sum. The interest rate can be fixed, it remains constant throughout the loan term. It can fluctuate based on market conditions. In India when we look at personal loan vs home loan the home loan interest rate ranges from 6.9% – 8.5% and personal loan interest rate ranges from 9.6%-8.5%

• Tax Benefits

In home loan vs personal loan Tax benefits refer to provisions within the tax code that provide certain advantages or deductions to borrowers. These benefits are designed to incentivize certain types of borrowing and can help reduce the borrower’s overall tax liability.

Read More: How to Save Money in India From Salary

Conclusion

When you know the aspects of a Personal loan vs a home loan you can easily avail of this loan whenever you need it. If you are planning to renovate a home or buy a home then you can choose a home loan. Home loan offers you a loan at a lower interest rate. As we have seen personal loan is very helpful to get from any bank to make your needs fulfilled. Be it marriage, education, or travel you can always rely on personal loan. It will help you to outcome the financial shortage. So knowing all the details of home loans vs personal loans will give you a proper view of your financial needs.

Home Loan vs Personal Loan – FAQ

What is a Personal Loan?

Ans. A personal loan is a loan you can get from banks or financial institutions to fulfill your financial shortcomings. You can use it for marriage, travel, vacation, and many others.

What is a Home loan?

Ans. If you are planning to construct your home or renovate your sweet home then you can avail a home loan.

Can I make use of a personal loan to buy a house?

Ans. Yes, you can use a personal loan to buy a house usually people take personal loans to consolidate debt or to fulfill other financial short comes.

What is the difference in interest rate in a home loan vs a personal loan?

Ans. In-home loan vs personal loan, the rate of interest of the personal loan is 8.95%-21.30% for a personal loan whereas 6.65%- 9.90% for a home loan.

How much time does it take to avail of a personal loan in a home loan vs a personal loan?

Ans. You can get a personal loan instantly from any financial institution or bank.