Buying a house or renovating your home are major life milestones. Most Filipinos need a little help to fund these investments. If you’re at this point, you may be wondering if you should get a home loan or an easy-approved personal loan.
In this article, we’ll dive into personal loans vs housing loans and what you can use them for to help you make the right decision.
Difference between home loan and personal loan
Loan purpose
A personal loan is designed for personal use, usually to help an individual make crucial purchases if cash flow is a challenge. You can use personal loans for a wide range of purposes, including education, medical bills, and debt consolidation. You can also use a personal loan for a home renovation in the Philippines. If you want to know more, you can read here about what personal loans are.
In comparison, a home loan is made specifically to help people afford a residential lot or house or build a home by letting them pay in installments. The most obvious purpose of home loans is for buying residential properties, but you can also use the loan to construct a new home, refinance an existing loan, or renovate your existing home.
Can I use personal loans for home improvement? Yes! You may also use a personal loan for renovations, especially minor projects that require a smaller budget.
Metrobank’s Home Loans have a provision for home equity loans which lets you use your existing property as collateral to fund your home improvement project. This is the most suitable option if you have major home renovations planned.
Loan amount
Personal loans and home loans also vary in the amount borrowers can receive.
With Personal Loans, borrowers can borrow smaller loan amounts starting from PHP 20,000 up to PHP 2 million, which could cover small repairs and minor renovations.
On the other hand, Home Loans start from PHP 500,000 and can go up depending on the property's value and the borrower's eligibility. Generally, home loans are designed to help you purchase a new home, fund the construction of a new home, or pay for a major renovation.
Eligibility and requirements
Personal loans are generally more accessible than home loans since they are a type of unsecured loan, meaning they have lighter eligibility criteria and fewer documentary requirements.
For Metrobank Personal Loans, you need to meet the following criteria:
- A Filipino citizen
- At least 21 years old at the time of application; must be up to 65 years old upon loan maturity
- Have a gross annual income of at least PHP 350,000
- Be a depositor of Metrobank or have an existing credit card with any bank
- Employees must be of regular status and at least a year with the current employer
- For self-employed individuals, your business must be operational for at least two years
- No collateral
You can apply for a Personal Loan online and submit only these two requirements:
- Signed Promissory Note and Disclosure Statement (PNDS)
- Valid government ID
For Metrobank Home Loans that offer higher loan amounts, eligibility requirements are stricter. Applicants must prove not only their identity (i.e., proof of identity) and the legitimacy of the property to be used as collateral (e.g., Transfer Certificate of Title, Tax Declaration, etc.), but more importantly, their ability to repay the loan.
To prove this, you must meet these criteria:
- Must be at least 21 years old at the time of application
- Have a gross monthly family income of at least PHP 40,000
- Employees must have employment tenure of at least two years with the current employer
- Entrepreneurs must have a profitable business for the past 3 years
- Have a good credit history
- The collateral must be a residential property
Check out the complete list of requirements here.
Interest rates
Interest rates for a home loan vs a personal loan also vary. Personal loans have a minimum monthly add-on rate of 1.25%. Besides the interest rate, your loan will also come with applicable fees:
- Disbursement Fee – applicable upon loan disbursement
- Documentary Stamp Tax – applicable for loan amounts above PHP 250,000
- Late Payment Fee – applicable for missed payments
- Pre-termination Fee – applicable for early repayment of the loan
Meanwhile, the lowest annual interest rate for home loans is 7.25% for a one-year fixing period. At the end of the fixing period, Metrobank re-prices your loan and adjusts the interest rate accordingly. This means that the interest rate for home loans changes every year or up to every five years.
Other fees include:
- Appraisal fee
- Title investigation fee
- Registration fee
- Notarial fee
- Handling fee
- Mortgage redemption insurance
- Property insurance
Repayment terms
Both home and personal loans offer flexible repayment terms.
Personal loans can be paid in increments of 12, 18, 24, and 36 months. Some banks offer up to 5 years.
Meanwhile, home loans can be paid in 10 to 25 years.
Processing time
Personal loans are processed in just seven to ten business days. The quick processing time makes personal loans useful for emergency needs, and which is why it works well as a home improvement loan in the Philippines.
Since home loans require stricter evaluation, the processing time takes longer and varies per case.
Discover the best loan for your home needs
Metrobank offers different types of loans to match the different needs of Filipinos today. We hope that this article helped you differentiate personal loan vs housing loan and decide which works best for you.
Taking on a loan is a major responsibility. If you need more information to help you decide on the most suitable loan for your needs, you can read more about loans.
