Money can sometimes become confusing, especially when you seek a home loan in Dubai to buy a property or some other personal expenses. The two terms that raise the confusion are often “Personal Financing” and “Home Financing.” While they both are related to money, they are intended for different purposes and have different characteristics. A bit confusing, right? Let’s take a deeper look at it with our blog post. We’ll cover the differences between these two financial concepts to improve your understanding.
So, without further ado, let’s begin.
What is Home Financing?
If you have recently met a mortgage broker Dubai the term home financing might be a bit familiar to you. If not, let us tell you. Home financing, also known as a mortgage, is a kind of money one borrows to buy a property. Generally, people do not have savings in hand to buy a home straight away, and in such cases, they take support from home financing to make the purchase possible for them.
What Does Home Financing Include?
Long term commitment
Home financing is a story spanning over the years. A mortgage is usually a big amount borrowed to purchase a home, and repaying it requires a lot of years, making it a long-term commitment.
Secured by a Collateral
The property you buy with the borrowed amount serves as a Collateral. This means it is a security element for the lender and could be taken away if you fail to pay back the amount and interest.
Home financing is a type of financing only for purchasing a property.
What is Personal Financing?
Personal financing is about the money cycle related to everyday expenses, investments, savings, or any other financial goal or need that is not related to buying a property.
What Does Personal Financing Include?
Diversity of goals
Personal financing has a broader scope. It means it can utilized for a bigger range of needs and goals. Be it daily expenses, buying a car, making an investment, or as a retirement plan.
No Collateral needed
Personal financing is not similar to home financing as it does not require any Collateral. Why? Well, because it does not involve borrowing money to buy a big asset like a house.
The best part of personal financing is that it offers flexibility. The person is always in charge of managing individual needs and goals as per will.
To conclude the debate, it is clear to say that home financing and personal financing are both related to money but do not serve the same purpose and possess different characteristics. Home financing is specifically related to purchasing a house. It is an extended commitment that includes repaying for years. Not only this, home financing also needs collateral, which is the property itself. While on the other hand, personal financing is all about flexibility. It does not include any collateral and can be utilized as per the individual’s will. So, before you set out to buy a home in Dubai, it is a great idea to understand the two terms.