Home loans are secured against property, so rates are far lower (7-9%) than personal loans (11-24%). For any amount above ₹5L, a home loan almost always costs less in total interest.
Worked examples
Suresh, 35 — ₹30L loan, 10-year tenure
Suresh needs ₹30L. Home loan at 8.5%: EMI ₹37,160, total interest ₹14.6L. Personal loan at 14%: EMI ₹46,570, total interest ₹25.9L. Suresh pays ₹11.3L more in interest with a personal loan. On top of that, the home loan saves him ~₹50,000/year in tax on interest deduction. Net advantage of home loan over 10 years: ₹16.3L.
Frequently asked questions
Can I use a personal loan for a house down payment?
Most banks prohibit this. A large recent personal loan also reduces your home loan eligibility since it affects your debt-to-income ratio.
What is the maximum tenure for a home loan vs personal loan?
Home loans: up to 30 years. Personal loans: typically 1-7 years. The longer tenure lowers EMI but raises total interest on home loans.
Do home loans have prepayment penalties?
For floating-rate home loans, RBI mandates no prepayment penalty. Fixed-rate home loans may have 2-3% prepayment charges.