Confronted with financial requirements like financing the education of a child, medical expenses, or business growth, deciding on the nature of the loan to take becomes inevitable. Although mortgage loans and personal loans are used to acquire funds, each has pros, advantages, and appropriateness that are different from one another. A mortgage loan, or loan against property, is collateralized by mortgaging immovable property, while a personal loan is not secured and has a higher interest cost.
The following are the top 10 benefits of opting for a mortgage loan compared to a personal loan:
Table of Contents
1. Lower Interest Rates
One of the greatest benefits of taking a mortgage loan is the substantially lower interest rate than a personal loan. Because the loan is secured against a property, the banks treat it as a risk-free loan, and that reflects in terms that are much better for the borrower. Over time, this interest difference can make a huge saving.
2. Greater Eligibility for a Larger Loan Size
Home loans tend to provide a larger loan amount since they are secured by an asset. Based on the market price of the asset, the borrowers may avail of 60–70% of the value. Personal loans have a lower upper limit since they are not secured by collateral.
3. Larger Repayment Tenure
The second important advantage of a mortgage loan is the longer repayment period, which runs between 10 to 20 years. This makes the repayments through smaller EMIs, thereby making it easy on the pocket. Personal loans have shorter repayment periods of between 1 to 5 years with higher monthly outflows.
4. Flexible Use of Funds
Personal loans and mortgage loans are equally unrestricted in use, but mortgage loans are even more convenient for large financial needs. During education, business development, or medical emergencies, the loans can be utilized as desired by the borrower.
5. Better Approval Opportunities
As the mortgage loan has something tangible at stake as collateral, it will appeal to banks even to those with poor credit scores. Personal loans are more about good credit track history and income profiles, and hence can be more difficult to secure in certain instances.
6. Lesser EMI Burden
With an extension of tenure and lower interest rates, home loan funding takes a sizeable burden off the financials of EMI. The borrowers can even use a facility such as an EMI forecasting tool in the form of a loan against property calculator to predict EMIs in advance and manage repayments better.
7. Leverage Residential or Commercial Property Facility
Mortgage loans are flexible as far as the type of property to be used as collateral is concerned. Borrowers can either use residential or commercial property to secure the loan. This is especially convenient for entrepreneurs who do not want to disrupt their business capital.
8. Advantages of Balance Transfer
Most of the lenders provide the facility to refinance mortgage loan takers and transfer their due amount to another lender with better terms of payback or rate of interest. This again reduces the cost of interest and enhances management of the loan. Personal loans hardly provide such flexibility to refinance.
9. Tax Benefits
In some instances, mortgage loans can even provide tax advantages. For instance, in the case of using the money for business, the interest paid is considered a business expense under Income Tax laws. This indirect economic advantage is yet another reason mortgage loans have been so popular.
10. Greater Financial Discipline and Transparency
With extended tenures, disciplined EMIs, and reduced interest expenses, mortgage loans promote better financial management and discipline. Individuals can use a loan against property calculator to calculate and budget their EMI repayments from the outset.
Backed by Reliable Housing Finance Institutions
Responsible housing finance organizations such as Grihum Housing Finance offer integrated assistance for mortgage loan proposals, from eligibility guidance to documentation verification and EMI planning. Their customer-focused style of work and technology-enabled tools, such as EMI planners, make borrowing easier.
Conclusion
Side-by-side comparative analysis of mortgage loans and personal loans reveals that mortgage loans are a cheaper and more convenient mode of borrowing than personal loans, particularly for homeowners who need higher loan amounts or longer tenures. Lower interest rates, larger periods of loan repayment, and various usage of the funds make mortgage loan a valuable method of utilizing the property value without parting with the property.
Those who want to find out their prospective EMI and repayment tenure can employ a loan against property calculator to make an informed decision regarding money. The selection of the financier is also crucial, and Grihum Housing Finance distinguishes itself by offering customer-centric services with transparent handling of the loan.
