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What Is The Difference Between Home Loan And A Property Loan?


Many individuals often get confused with the difference between home loan and property loans. Sometimes, they are loosely used terms and interchanged conveniently. However, there is a big difference between the two.

Understanding the difference between home loan and property loan

A home loan is taken for buying a house, no matter whether it is under construction or ready. The idea of a home loan is to buy a house or build one as the case maybe.

What Is The Difference Between Home Loan And A Property Loan?
A property loan is a more comprehensive type of loan and generally involves mortgaging an existing property. It could also include land. So, in short what it means is availing a loan against an existing piece of land or property. So, you are basically mortgage your asset in a loan against property.

No tax benefit for individuals on property loan

The other major difference between a property loan and a home loan is that there is no tax benefit to the former. For example, there is a tax exemption of Rs 1.5 lakhs on the principal amount paid in the case of home loans. Interest amount on home loans qualifies for tax exemption up to a limit of Rs 2 lakhs.

Read more on home loan tax benefits

On the other hand a loan against property does not give one tax benefit to individuals.

However, there are other provisions that allow businessmen to claim tax benefits.

Property loan can be used for any purpose

The other difference between a property loan and a home loan is the end-use. In the case of a home loan, the loan is given to buy a home. On the other hand in the case of a property loan you can mortgage your property and use the same for a variety of purposes including higher study for kids, expansion of business, marriage, medical emergency.

While the property loan will be disbursed to the applicant, in the case of home loans the amount would be paid to the builder or the seller of the property as the case maybe.

In both cases of course the bank or the financial institution in question would scrutinize all your documents before lending the money.


The one similarity in the case of both loans is that the bank has the option of selling the property in case you do not fulfill your commitments.

Read what happens when you cannot pay your home loan

In both the cases your CIBIL score and other eligibility matters. You may have more documentation involved in the case of a home loan.

Interest rate difference

The interest rate is more in the case of a property loan than a home loan. In fact, the latter is the most competitive loan that is available in the market.


A home loan is taken to create an asset, whereas in the case of a property there is already an asset that is created. Not many individuals like to go for a property loan, because they do not want their property to be sold in case their not able to pay.

Property loan is not the best form of loan and many individuals prefer other types of loans including personal loans and gold loans.

Read more about: home loan property loan
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