Understanding the Difference between Home Loan & Home Construction Loan
A home loan is a credit that individuals receive for the sole purpose of purchasing a house. The housing loan interest rate will vary across different financial institutions and monthly EMI payments are expected to be made on time. The property that you buy with your home loan can be either used for personal or business purposes. Banks will treat the purchased property as security until the whole borrowed amount along with the interest is paid-off in full.
If you own a plot of land and plan on building a house on it, then a home construction loan is the best option. This type of credit is generally short-term and is also provided if you want to expand on your already existing house. Let’s consider the differences between these two types of loans in the subsequent points.
- Application Process
The paperwork required for a home loan is far less than the number of documents required for a house construction loan. This renders the latter’s application process much more complex than the former. Thanks to the advances in technology, you can apply for these kinds of loans online, which makes the procedure hassle-free.
You can repay your home loan over a maximum period of 30 years. However, the upper limit of the house construction loan tenure is 15 years. The greater the repayment period, the smaller the monthly EMI. Thus, with regards to the time-period, home loan gains the upper hand.
- Interest Rate
The options available with regards to house construction loans are extremely limited as compared to home loans. This implies that your home loan interest rates will be much lower as compared to home construction finances. To put it more simply, the high competitiveness among the housing loan companies is actually beneficial for the clients.
- Tax Benefits
You can avail income tax benefits on both, the interest and principal amount borrowed for the house loan. Such benefits are also provided by home construction loans, but the process of availing them is quite lengthy and arduous. This makes obtaining a home loan extremely advantageous.
Once you have decided to apply for a home loan, make sure to organise all your paperwork for submission. You can apply for home loan online by filling out a simple form. The housing loan eligibility criteria states that you should be at least 23 years old and no more than 70, either be salaried or self-employed, possess clean records with regards to past debt repayment, have a good credit score, and have at least 3 years of total work experience. The documents required for home loan are as follows: ID proof with photograph, residential address proof, income proof, property proof, and lastly, business proof.