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Horror fiction is comparatively new genre in literature and is widely popular among the young generation. This study distinguishes between terror and horror, and how does such fiction affect the characters in the selected novels. It also argues that in classical fiction, it was terror that was produced by the writers and experienced by the characters and readers, while the modern fiction offers horror to both i.e., characters and readers. Based on this distinction, the present study has used Ann Radcliffe’s (1826) perspective when she defines terror and horror based on the effects it produces. This paper implies that the fear that was created by classical fiction was terror while the fear created by and presented in modern fiction is horror. The present study is qualitative in nature and has followed the technique of close reading to critically analyze the texts of both classical and modern novels and has explained the difference between terror and horror and its effects on the characters.