Personal Loan VS. Mortgage Loan: Key differences that you need to know

Reviewed by: Balakrishnan Narayanan

  • Updated on: 29 Jan 2024
  • Published on: 11 Jan 2024
Personal Loan VS. Mortgage Loan: Key differences that you need to know

Being clear about the difference between a loan and a mortgage can completely transform your experience with credit. It boils down to attaching an asset as security for the amount you plan to borrow which can have far-reaching consequences on your future financial health. 

You can make a better decision by learning about how this can affect factors such as:

  • Your credit score
  • Borrowing costs and repayment ease 
  • Disbursal timeline
  • Asset risk 

To understand the features of a personal loan vs mortgage loan, read on. 

Personal Loan: Meaning

This is a collateral-free credit facility through which you can get funds without attaching any asset (such as a bike, car or home) as security. Thus, approval hinges on:

  • Your creditworthiness 
  • Earning and income 
  • Meeting the lender’s eligibility terms

You get funds based on your repayment capacity and borrowing history. You can use the amount without any end-use restrictions and for any purpose, such as:

  • Medical emergencies
  • Home renovation
  • Travelling
  • Debt consolidation
  • Purchasing a vehicle

Personal loans offer the following benefits:

  • Quick Approval: Lenders generally approve personal loan applications and disburse the funds quickly, allowing you to manage time-sensitive needs
  • No Risk to Assets: Since these are unsecured loans, you don’t need to provide any collateral as security and risk your asset
  • No Restriction on Usage: You have the benefit of using the funds for any planned or unplanned expenses as per your requirements

Mortgage: Meaning

This is a secured loan where the property you own acts as the security or collateral. This gives the financial company the right to sell the asset to recover the debt in case you don’t or can’t repay it in full. This is the main difference when it comes to choosing a mortgage vs loan. 

The amount you can access as financing is dependent on the property you pledge:

  • Upkeep and maintenance
  • Location 
  • Amenities 

In general, you can use this loan to buy another property, construct a home or for other purposes such as financing a wedding. 

You enjoy these benefits with a mortgage loan:

  • Extended Repayment Tenure: These loans typically come with longer repayment tenures, allowing you to repay the amount conveniently
  • Lower Interest: Since your property acts as a security, you get affordable rates for the loan
  • Investment: Since real estate’s value keeps increasing with time, purchasing property is a good investment

Understanding Mortgage Vs. Loan

Here is a tabular overview of the differences between these two options:

Basis of DifferencesMortgage LoanPersonal Loan
Loan AmountHigher loan amounts based on property valueLower to moderate amounts based on repayment capacity
CollateralProperty serving as collateralNo collateral needed
Interest RatesLower interest rates as the lending risk is lowComparatively higher interest rates as the lending risk is high
Loan TenureLonger tenure, typically 15-30 yearsShort to medium tenure, typically 1-5 years
Processing TimeLonger processing time as there’s extensive verificationShorter processing time as there is no extensive verification
Credit ScoreMay be required in some casesRequired in most cases

Important Points to Consider

Here are some important points to note while assessing mortgage vs loan:

  • Personal loans can be ideal for short-term requirements due to shorter tenure
  • Funding from a mortgage can come with end-use restrictions as the funding is generally used for real estate purposes
  • Your credit score is crucial in personal loans but not as important in mortgage
  • Your asset is at risk in a mortgage as the lender can seize it in case of default
  • Personal loans are generally available relatively quickly than mortgages, making them ideal for urgent requirements
  • Mortgages come with longer tenures, making them ideal for long-term needs

If a personal loan is more suitable for your needs, consider getting Fibe’s Instant Cash Loan. You can get up to ₹5 lakhs at affordable rates and enjoy various other benefits like minimal documentation and eligibility requirements, zero processing charges and more. Download the Personal Loan App or register on our website to apply!

FAQs on Mortgage Vs. Loan

Which is better mortgage loan or a personal loan?

Deciding the ideal option between personal loans and mortgages requires a thorough assessment of several factors. Some of these are: 

  • Purpose of the loan
  • Availability of security
  • Tenure and cost

What is the main difference between a mortgage and a loan?

While a mortgage is a secured loan where you pledge your property as collateral, a loan can be either secured or unsecured. 

Is a CIBIL score needed for a mortgage loan?

While all financial companies check your credit score no matter which credit facility you choose, the importance given to it differs from lender to lender.


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