Borrowing money is common today, whether you need it for emergencies or to achieve important goals. The two most popular borrowing options are a personal loan and a mortgage loan, but most people don’t completely understand how they differ.
Each loan works differently and is intended for different financial needs. In this blog, we’ll break down everything in the simplest words so you’ll know exactly which loan is right for you.
Understanding Personal Loan
A personal loan is an unsecured loan, which means you don’t need to pledge any property or asset to get it. The bank offers the money based on your income, credit score, and repayment history.
Because personal loans are unsecured, they typically carry higher interest rates than secured loans (like mortgages). Exact rates depend on credit score, income and lender pricing.The approval process is speedy and requires minimal paperwork.
Personal loans are typically taken for medical needs, weddings, education, travel, or urgent expenses. The repayment period generally ranges between 1 to 5 years.
Understanding Mortgage Loan
A mortgage loan is a secured loan in which you must give property, such as a house, land, or commercial space, as collateral. Because the bank has security, the interest rate is much lower than that of a personal loan.
Mortgage loan tenures commonly range from 10 to 30 years, depending on the lender and borrower eligibility.
They are suitable for property purchases, home renovations, business expansions, or other significant financial goals. The processing time is longer due to property verification and legal checks.
Difference Between Mortgage and Personal Loan
Both loans help you borrow funds, but they work differently. A personal loan and a mortgage loan mainly differ because a personal loan is unsecured, while a mortgage loan is secured with property. This difference affects everything like interest rate, loan amount, repayment period, and approval time.
A personal loan is easier to get and is processed much faster. It does not require collateral, but the personal loan interest rate is higher, and the repayment time is short. This makes it ideal for short-term or urgent needs.
A mortgage loan takes longer because the bank checks property papers, valuation, and legal clearance. However, the interest rate is lower and the loan amount can be much higher. This is suitable for long-term financial plans and high-value requirements.
Here’s a quick comparison:
| Factor | Personal Loan | Mortgage Loan |
| Collateral | Not required (unsecured loan) | Property required (secured loan) |
| Interest Rate | Higher personal loan interest rate | Lower interest rate |
| Loan Amount | Lower Loan Amount | Higher Loan Amount |
| Tenure | 1–5 years | Up to 30 years |
| Processing | Shorter Processing time | Longer Processing time |
| Risk | No asset risk | Risk of losing property if not repaid |
| Best For | Short-term needs | Long-term high-value needs |
Personal Loan or Mortgage Loan, what’s better for you?
The better loan depends on your financial situation.
A personal loan is better when you need quick money, don’t want to give collateral, and are okay with a higher interest rate and short repayment time. It’s perfect for short-term goals and emergencies.
A mortgage loan is better if you need a large amount of money and prefer low monthly installments. If you don’t mind pledging property and want lower interest rates and longer repayment time, a mortgage loan makes more sense.
To decide easily:
- Go for a personal loan if your need is urgent and short-term.
- Go for a mortgage loan if your need is long-term and requires a high loan amount.
Conclusion
The main difference between a personal loan and a mortgage loan is security and purpose. A personal loan is an unsecured loan with faster approval but higher interest rates and short tenures. A mortgage loan is a secured loan with lower interest rates, higher loan amounts, and long repayment periods.
LoanTap differentiates itself by offering loan solutions designed around the customer’s needs and convenience. The right loan will support your goals without creating stress.
FAQs
1. Which loan has lower interest rates?
Mortgage loans have lower interest rates.
2. Do I need property to get a mortgage loan?
Yes, property is required as collateral.
3. Is a personal loan easier to get?
Yes, because it needs less documentation and no property security.
4. What happens if I fail to repay a mortgage loan?
The bank can take possession of the pledged property.
5. Can a personal loan be used for business?
Yes, but for big business funding, a mortgage loan is a better option.
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