Home loans and personal loans both are the financial services provided by almost all the banks and financial institutions in the country. These two are one of the most essential and largely availed services by the people of this country.
Home loans and personal loans serve entirely different purposes. An individual goes for a home loan when they want to have their own home and goes for a personal loan for meeting any expenditure.
- A home loan can be availed for many purposes such as Home Purchase Loan, Home Construction Loans, Home Improvement Loans, Home Extension Loans, Land-Purchase Loans/Plot Loans, NRI Home Loans.
- A personal loan can be availed for many purposes, such as repaying any existing debts, home repairs, meeting marriage expenses, purchasing any gadgets, meeting any other everyday expenditure.
Banks charge specific interest in both home loans and personal loans. In the case of home loans, banks charge EMI (Equated Monthly Installments), which are to be paid every month, while in the case of a personal loan, the interest is to be paid at fixed intervals.
One of the significant differences between a Home Loan and a personal loan is that a home loan is secured. A home loan is secured against the value of the property, while a personal loan is unsecured. This is the main reason why a personal loan is more expensive than a home loan. Because banks are operating without any collateral in personal loans, they charge a higher interest rate. The lowest interest rates, which are implicated in a home loan, can go to as low as 6.6%, while in the case of personal loans, the interest rates can be as high as 10%. The lenders often offer a lower amount of loan in case of personal loans as it is unsecured, so to get a house, the borrower has to go for a home loan.
One more advantage of a home loan in comparison with a personal loan is tax benefits. A person can claim tax benefits in the form of tax deductions under Section 80 C of the Income Tax while paying the EMI of a home loan. But no such tax deduction is available in personal loan.
The benefit of tenure is made available with a home loan and not with a personal loan. Home loans are generally long-term and may go to as long as 30 years, while personal loans are short terms. The repayment of home loans is a much easier task as the compensation is spread over a long period.
Moreover, it is believed that a home loan is a better way to enhance your credit score than a personal loan. With prompt and timely repayment, an individual can improve their credit score in a better way. But the benefit of such can be seen more in a home loan due to its long tenure and better opportunity to make regular payments over a more extended period to enhance the credit score.
One common feature that is similar between both home loans and personal loans is the ease of availability. With enhanced competition and clutter in the financial markets, banks and other financial institutions are gearing up to attract more and more customers and provide them with many benefits and create dominance in the market.
So many lenders are offering similar services, and the customer has to choose the best amongst them. This calls for an accurate customer analysis of what they have to choose as per their needs and capacity. For example, ICICI Home Loan is known for providing the best in class customer service in the market. There are much more available from which the choice has to be made.
The process of applying for a home loan as well as personal loans has been simplified. Now the customer does not have to stand in enormous queues and wait for their turn. They can avail of any banking services at their fingertips. All the benefits of the banks and other financial institutions, including home loans and personal loans, have been made available on the lender's respective websites, portals, and mobile applications.
Conclusion:
Home loans and personal loans both serve different purposes, and both are pretty essential. Home loans are relatively cheaper and safer than personal loans, while personal loans are easier to avail with less documentation.
