Home Loan vs Personal Loan: What’s Better?

Can I prepay and how does it differ across products?

Home loans typically allow part-prepayment and foreclosure with modest charges, especially for floating-rate loans after regulatory updates. Personal loans often have prepayment windows and fees expressed as a percentage of outstanding. Prepaying early reduces future interest substantially for both products. Clarify whether your lender will reduce tenure or EMI post-prepayment and obtain an updated amortization schedule.

Which is faster to get?

Personal loans are designed for speed—digital journeys can disburse within hours, provided KYC and bank statements are clear. Home loans require property documents, valuation, and legal checks; timelines vary by project and city. If immediate liquidity is the goal, personal loans win; for property purchase, home loans are essential for affordability.

What about interest rates and tenure?

Home loans are secured and carry lower rates with tenures up to 30 years, making EMIs lighter. Personal loans are unsecured, with higher rates and shorter tenures up to 5 years. Choose based on asset-backed needs and repayment capacity. If you need bridge finance and can repay quickly, a short personal loan may suffice; for long-term housing, home loans are appropriate.

Are there tax benefits?

Home loans may provide tax benefits on interest (Section 24) and principal (Section 80C) subject to conditions. Personal loans don’t generally provide tax benefits unless used for specific deductible purposes with documentation. Base your decision on suitability and total cost rather than tax alone.

How do documents differ?

Home loans require property papers, builder approvals, valuation reports and extensive KYC. Personal loans rely on income proofs, bank statements and basic KYC. Keep records digitized and respond promptly to information requests to avoid delays.

What if rates change?

Home loan rates track benchmarks and can reset periodically; you can prepay or refinance via balance transfer. Personal loans are generally fixed-rate—EMI remains constant. If rate cycles rise, prepayment on home loans helps stabilize EMI; personal loan strategy focuses on faster closure to contain interest.

Can I convert a personal loan into a home loan?

No direct conversion exists; however, you can close a personal loan using surplus or a balance transfer to a lower-rate product if available. For home purchase, plan financing directly with a home loan to capture lower rates and tax benefits from the start.

What’s a practical decision framework?

Define the purpose, timeline and repayment comfort. If funding a house, choose home loan; if managing short-term cash needs or consolidating small expenses, consider personal loan after budgeting. Use the EMI Calculator and Eligibility Calculator to test scenarios before committing.