In the world of real estate, one of the most frequently asked questions is: home loan vs personal loan — which one is better for property investment? With the booming property market in India, especially in cities like Pune and Mumbai, more and more people are exploring their options for financing their dream homes or investment properties. But choosing between a home loan and a personal loan can be tricky if you don’t know how each functions in the context of real estate.
Let’s break down the differences, explore how each option works, and determine which one is more beneficial for your property investment journey. We’ll also introduce you to some exciting ongoing and completed projects that you can consider as you plan your next move in real estate.
Understanding the Basics: Home Loan vs Personal Loan
To begin with, it is necessary to understand what each type of loan is and what it means. A home loan is a kind of secured loan that is availed for the purpose of buying a house or constructing a house. It is linked with long-term leases, low interest rates, and significant tax benefits. A personal loan is unsecured, can be used in any way (it can be used to purchase properties), and takes less time to be approved but has higher interest rates and shorter repayment periods.
Hence, it can be concluded that a home loan is preferable over a personal loan depending on the purpose, time horizon, and type of property investment.
Which is More Cost-Effective?
The interest rates are one of the most influential factors that can sway the decision between a home loan and a personal loan. Home loans are cheaper than other loans because they are secured by the property. Personal loans are usually not backed by any collateral and as such, they are more expensive than secured loans.
In the long run, this can amount to considerable savings. For instance, if you are planning to buy a flat in Pune or Mumbai, going for a home loan may help you save tens of lakhs of rupees in terms of interest. Thus, in the aspect of cost, the home loan is almost always the better option.
Processing Time and Flexibility
There are cases where time is of the essence. It is possible that you have found the right investment that is available in the market for a limited time only. Here, a personal loan may seem more suitable because it is issued faster and the money is released immediately. This is because it is possible to get a personal loan approved in 24 to 48 hours. But is that enough to win the home loan vs personal loan debate? Not always.
Although home loans take time to be processed due to the papers and legal procedures involved, they are much more advantageous in the long run. However, many lenders have adopted online procedures and pre-approval of loans, which has reduced the time difference to a great extent.
Loan Amount and Tenure Flexibility
In real estate investment, the amount of loan and the time frame are two critical factors to consider. Home loans are for a higher amount of money, up to 80-90% of the property’s value, and with a longer period of up to 30 years. Personal loans are relatively smaller and have shorter tenors of 12 to 60 months.
Thus, in the home loan vs personal loan comparison, the long-term financial advantage that is associated with home loans places them in a better standing. It is easier to manage your EMIs and budget when you are not compelled to pay back the loan within a short time.
Tax Benefits: Another Major Factor
The tax benefit is one of the most persuasive arguments in support of home loans. As provided by the Income Tax Act in Section 80C and Section 24(b), one is allowed to claim the deduction on the interest as well as the principal amount of the home loan.
There are no such benefits of personal loans unless you can prove that the loan was used for the purchase of property or for construction or renovation of property and even in this case it is rather doubtful. Hence, in the taxation aspect, home loan is a clear winner in the home loan vs personal loan fight.
Risk and Collateral Concerns
A home loan is a secured loan, which implies that the property being purchased is used as collateral for the loan. This has the impact of reducing the risk for the lenders and thus leads to better loan terms for you. Personal loans are not secured, which makes them more risky for the lender and therefore have higher credit requirements and worse terms.
Hence, if you are thinking in terms of long-term stability of your investment, this is another factor that you should look at when comparing home loan and personal loan.
When Might a Personal Loan Make Sense?
However, this does not mean that personal loans are out of the question, given all the benefits of home loans. They can be useful in some circumstances:
- For the down payments that a home loan cannot afford
- For minor renovations or remodeling, it is advisable to hire a general contractor who will be in charge of the project and hire other subcontractors.
- In case you do not qualify for a home loan but you have an urgent need for cash
- When the investment amount is relatively low, the cost of capital is high and this is because the cost of capital is inversely related to the amount of investment.
- When you wish to pay off the loan within a short time period
In such specific circumstances, the home loan vs personal loan decision may turn in favor of personal loans. However, these are the exceptions rather than the rule.
Let’s Talk Real Properties: Explore Opportunities with Pyramids Properties
With that understanding of the financial aspect let’s proceed to the fun part, what properties are worth investing in?
Pyramids Properties is a real estate company that has been in business for several years and has its offices in Pune and Mumbai and has been known to deliver good quality residential and commercial properties. Their selling and velocity sales strategies have helped many homebuyers and investors to own properties that are long-term wealth and lifestyle assets.
The following are some of the current projects by Pyramids Properties that can be invested in real estate:
- Magnum Lifestyle, Dhanori, Pune – 2 BHK homes by VVM Group
- Arun Aion, Ravet – Smart 1 & 2 BHK apartments
- La Ventana, NIBM – Premium 3 & 4 BHK residences
- Urban Hills, Thane – Stylish apartments by Lotus Group
- 38 Divine, Kondhwa – Luxurious living by United Contractions
- Navratna Exotica, Hadapsar – Smart homes in a prime location
- Code Name T3, Undri – 2, 3 & 4 BHK homes by Venkatesh Bhoomi is a new residential project by the leading real estate company Venkatesh Group in Undri, Pune.
For those who are interested in ready-to-move or already-sold projects, Pyramids Properties has a number of successfully completed projects, including:
- Mavens Viaan, Swapnapurti, Laxmi Satyam and Anika Ecclesia
- Chamber 63, 93 Avenue, EBZ Business Zone, and GreenYard Towers
These projects are in the best areas of Pune such as Hadapsar, Dhanori, Ravet, NIBM and many more, so the investors can select according to their budget, size and location.
Final Verdict: Home Loan vs Personal Loan
Thus, which is the best for property investment – home loan or personal loan? In most cases, the answer is in the affirmative as far as home loans are concerned. They have lower interest rates, longer time to repay the loan, higher loan amount and many tax benefits.
Personal loans are suitable for small and urgent needs but not for property investment because they are costly and short term. Hence, if the goal is wealth creation in the long run, creation of assets and financial stability, home loan is more beneficial.
Seeking Help in Choosing the Right Investment
Choosing a property is as crucial as choosing a loan to finance the property you have chosen. That is where Pyramids Properties comes in. Therefore, based on experience in the real estate market, the portfolio of successful projects, and the need to satisfy the client’s demand, Pyramids is your reliable partner in investing in real estate. To first-time homebuyers and investors, they assist them in choosing the right properties that will fit their investment personality.
Choose the right property and the right financing because real estate is not just about buying an asset; it is about building an asset.