Everyone needs a loan at some point or the other. Sometimes people need a personal loan, sometimes a car loan, and many people even have to take a home loan to buy a house. You must have noticed that you get car and home loans at a low interest rate, but you have to pay more interest for a personal loan. For a personal loan, you have to pay interest ranging from 10 percent to 24 percent. Car loans or home loans are available between 6-9 percent. Let us know why personal loans are expensive compared to car-home loans.

Why is a personal loan expensive?
A personal loan is expensive because it is given for a short period. In this way, the bank gets interest only for a short period. At the same time, often nothing is mortgaged against the personal loan, due to which its interest rate is kept high to deal with default. To protect their profits, banks keep the rates of personal loans high, so that even if they incur losses on some loans, they can be compensated by the other loans.

Why is a home loan cheap?
One of the major reasons for home loans being cheap is that the government itself promotes it. All banks and NBFCs are provided money for home loans by the National Housing Bank. Banks get this loan at a cheaper rate of about 2 percent, after which the banks give you the loan.

On the other hand, if the home loan is for a long period, then the bank gets interest for a long time. In such a situation, despite keeping a low interest rate, banks earn a lot of money in the long term. On the other hand, when you build a house by taking a loan, then consider your house as a guarantee of the loan. If you are unable to repay the loan, then the bank will recover its money by selling your house.

Why is the government promoting it?
The government promotes home loans because it circulates a lot of money in the economy and also creates employment. When you buy or build a house, you pay a good amount to the government through its registry, etc. On the other hand, with the construction of every house, there is a demand for bricks, sand, gravel, iron rods, labor, etc. After the construction of the house, there is a demand for iron, wood, paint, furniture, etc. to decorate it. Many people get employment by building houses. This is the reason why the government promotes home loans and that is why there is a tax exemption so that more and more people take home loans.

Why is a car loan cheaper?
Whenever you buy a car, you pay GST, road tax registration charges, etc. On the other hand, when you fill petrol-diesel, the tax also goes to the government from that. Whenever you get service done or any repair is done, any part or accessories are used, GST is levied on all these, which brings money to the government. That is, the more cars are sold, the more money will reach the government. In such a situation, the government also promotes car loans, due to which its interest rates are also kept low.