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Many people are unaware of the difference between a Home Loan and a Mortgage Loan. However, the two loans are different in many ways. Let’s learn about them. Home Loans finance property, while Mortgage Loans use the existing property as collateral. They have different interest rates and repayment tenures.
Based on your purpose, you can choose a loan. If you plan to buy a home, you can go for a Home Loan. If you need a large amount of money for any business or personal purpose, you can take a Mortgage Loan against your commercial or residential property.
Let's check out what these loan terms actually mean and how they are different from each other.
Home Loan | Loan Against Property |
---|---|
To finance purchase or construction of residential property | Helps obtain funds against the value of an existing property |
Property that is being purchased or constructed serves as security | The property that you have is used as collateral |
Interest rates are generally lower compared to Loan Against Property | Interest rates are usually higher than Home Loan but lower than other loans |
Repayment Tenure: Longer repayment tenure of up to 30 years | Shorter repayment tenure of up to 15 years |
Tax Benefits is available for both principal and interest components | Tax Benefits can be availed only on interest component |
Loan to Value Ratio: Up to 80% of the property value | Loan to Value Ratio: Up to 60% to 75% of the property value |
Eligibility is based on credit score, income, age, and property value | Eligibility criteria mainly based on property value and income |
Documentation: Property papers, identity proof, income proof, bank statements, etc. | Documentation: Property papers, identity proof, income proof, bank statements, etc. |
Q: Is a Home Loan the same as a Mortgage Loan?
A: No, Home Loans are taken to finance the purchase or construction of a residential property, while Mortgage Loans are taken against an existing property as collateral. Home Loans have an intended purpose, while Mortgage Loans can be used for any legal purpose.
Q: Can we convert a Mortgage Loan to a Home Loan?
A: No, it is not possible to convert a Mortgage Loan to a Home Loan. However, borrowers can opt for a balance transfer to get lower interest rates on their existing loan.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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