Shall I opt for Personal loan or Home Loan to buy a piece of land for 12 lacs ?

POSTED BY subratabera ON January 28, 2014 6:07 pm COMMENTS (7)

Hi Friends,

I need a loan of 12 Lakhs to buy a piece of land and want to pay it back within a short span of time (3-5 years). Please help me to choose the option between personal or home loan. I heard that interest on personal loan is not compounded however its compounded for home loan. Please rectify if I am wrong. Also please help me calculate the total outcome and monthly premium payment for both the options.

Thanks and regards,


7 replies on this article “Shall I opt for Personal loan or Home Loan to buy a piece of land for 12 lacs ?”

  1. ashalanshu says:

    Dear Subrata, interest is compounded in both loans, be it personal or home.

    Home loan term depends upon the institution you are going to deal with. the maximum term can be 30Y.

    Although impact ‘ll be lower but still 13% in 5Y ‘ll have an impact on your financial position than 10.5% in the same time frame.

    Well, some times it’s advisable to let the loan continue and invest the surplus money elsewhere.



    1. subratabera says:

      Thanks a lot Ashal. That clears a lot of doubts for me.

  2. subratabera says:

    Thanks a lot friends for answering my question. I’m buying this for investment purpose. I’ve few more doubts.

    1) I’ve heard interest on personal loan won’t be compunded. Is it true?
    2) Can I get home loan only for 5 years?
    3) Is difference of 2-3% interest rate matter over short duration? I am assuming interest rate of 13% on personal loan and 10.5% on home loan.
    4) Isn’t it a good idea to pay the loan quickly with less interest outgoing?


  3. rahul123 says:

    Dear SB,

    What is the rate of interest you are getting on personal loan?


  4. Credexpert says:

    Dear Subratabera,

    The interest rate on Personal loan is much higher as compared to a Home loan. Besides, Rs. 12 lac is not a small amount and given the tenure of 3-5 years you should opt for a Home loan.

    You could use a simple EMI calculator which will help you understand your monthly cash outflow in form of EMIs. Ensure that you analyse your cash inflows before availing an additional loan – irrespective of its type i.e. Home loan or Personal loan.


  5. divya.advisor says:

    I am not aware of a personal loan that is cheaper than the home loan rates. So unless you are able to get a cheaper rates for personal loan it makes no sense to buy on personal loan.
    Remember to factor in the 1.5 Lakh exemption on interest if you buy to build a house on that property.

  6. jyoti. says:

    Is this for investment purpose or you are going to build house over their. Reason being is as much as I know you can’t get home loan against land. Or correct me if I am wrong.

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