What is a home loan and how does it work? A home loan is a financing solution that you can avail to buy a home with ease. Here, the plot, flat or other property that you are purchasing serves as collateral. However, you can also opt for this loan to renovate, repair or construct a home. repayable over a lengthy tenor of up to 30 years, at a nominal interest rate. This makes taking a home loan a cost-effective decision.