Banks and other financial institutes offer both Home Loans and Business Loans to their customers. While the former is used to buy residential property, the latter can be used to purchase property to expand a business. Additionally, Business Loans help upgrade the existing machinery.
Home Loans allow you to purchase an existing or under construction property. With this loan, you can also build a housing unit of a plot of land. However, there are several differences between a Home Loan and Business Loan. It is imperative to know them before you opt for these loans.
Nevertheless, before we look at the differences, let us understand what a Business Loan and Home Loan is?
What is a Business Loan?
A Business Loan is a term loan where the lender (banks and other financial institutions) lends a specific loan amount the borrower (business) has applied for. Typically, the loan terms will depend on what the lender is offering and the business history of the borrower. Along with this, the bank also considers:
Type of the business
Duration the business has been operational for
Credit Score of the business
What is a Home Loan?
A Home Loan is an amount borrowed by an individual to buy/construct a house for themselves or their families. These loans are available with a fixed obligation to income ratio. The borrower can get up to 80 per cent of the home value using a Home Loan. This loan is for personal and residential use.
Home Loans are also tax-deductible under Section 80C and Section 80EE of the Income Tax Act. Click to read more.
What are the differences between a Home Loan vs a Business Loan?
Some of the differences between these loans are:
Home Loans | Business Loans |
Tax Benefit: Home Loan principal payments are tax-deductible under section 80C, and the interest payments are tax-deductible under Section 24(b) of the Income Tax Act. | Tax Benefit: In Business Loans, only interest payments are tax-deductible under the income tax act. |
Eligibility: The income of salaried individuals must be of at least Rs. 10,000 p.m. Whereas self-employed individuals must present a minimum business income of Rs.2 Lakh p.a. Applicants should hold a good repayment record and a high credit score. Applicant must have minimum or no existing financial obligations such as a car loan, credit card debt, and so on. The age limit for salaried individuals is 21 to 65 years. The age limit for self-employed individuals is 21 to 65 years. | Eligibility: Businesses should have a minimum turnover of Rs. 40 Lakh Business must be in profit for the previous 2 years. The Minimal Annual Income (ITR) of the business must be Rs. 1.5 Lakh per annum The applicant must be at least 21 years when applying for the loan and should be no older than 65 years at the time of loan maturity. |
Interest Rate:
| Interest Rate: Business Loan interest rates will depend on the lender. Business Loan interest rates tend to be higher than Home Loans. |
Repayment Tenure: The repayment tenure for Home Loans ranges from 10 – 30 years. | Repayment Tenure: The repayment tenure for Business Loan is of 12 to 48 months. |
Now that we have seen the major differences between a Home Loan and a Business Loan, you can choose between a Home Loan or a Business Loan. You should pick the one that suits your needs the most.
To learn more about Home Loans or apply for a Home Loan at HDFC Bank, click here.
*Terms and conditions apply. Home Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.
