Difference between Home Loan and Business Loan
Banks and non-finance companies such as Bajaj Finserv offer both home loans and business loans to applicants who want to acquire a property. Borrowers avail home loans for already constructed properties, under construction properties, or those that will be constructed in the future. However, those who wish to avail term loans, for tapping into additional money when their business requires, they have to go for a business loan.
Term loans are lump sum of capital, which the lender delivers right into the business account of the borrower. The borrower has to repay the loan with interest within a time frame predetermined by the lender. As these loans are not guaranteed by the government, the business loan the lender offers may have a higher interest rate, a shorter repayment period, and lower amount of cash for each loan. The terms of the business loan primarily depend on what the lender can offer and the business statistics presented in the application. Lenders will consider the applicant’s type of industry, time for which the business has been running and the credit score during the process of underwriting.
Benefits of Home Loan
Home loans have a fixed-obligation-to-income ratio. Banks/NBFCs offer Home Loan up to 80 percent of the home value as a loan to applicants of home loans. Borrowers of home loans also qualify for tax deduction on payment of the principal amount under Section 80C of the Indian Income Tax Act, and for the interest component under Section 24(b) of the Indian Income Tax Act.
Additional Read: Home Loan Tax Benefits under Section 24, 80EE and 80C
Home Loan Interest Rate vs Business Loan Interest Rate
Banks and other lenders charge home loan interest rates at fixed and floating rates. However, they charge housing loan interest rate far lower than the interest rates for business loans. Although the lender charges additional processing fee for both types of loans, they may make some minor differences based on the profile of the borrower.
Also Read: Know about Different Types of Home Loans
