What is the difference between commercial and residential loans?

A commercial loan provides financing for a business property, while a residential loan finances a property you intend to live in. Because of the differences in the purposes of these two loans, their structures may also differ. Basic areas of difference include these:

  • Loan size--Commercial loans tend to be larger because business properties are often more expensive than personal residences.
  • Credit requirements--Typically, a business itself provides the financial backing for a commercial loan, and the business's credit and business plan are used to determine eligibility. A residential loan requires good personal credit and income.
  • Maturity--Commercial loans may be much longer than residential loans due to their bigger size.