Housing finance is the best way to purchase your dream home without exhausting your savings. However, while a home loan finances a major portion of your dream home’s cost, you still need to cover a small portion, which generally involves costs like down payment, repair and renovation, registration, etc. It’s important to have liquid funds to cover these expenses. Some people tend to dip into their emergency funds or liquidate their long-term investments to arrange cash, which can derail their financial plan. What if we told you there’s another way to manage funds while keeping your investments intact?
A personal loan can be an excellent solution in this case. Not only does it give you quick access to funds, but it also comes with flexible repayment terms and zero collateral requirements. You may ask— Is it possible to take a home loan and a personal loan simultaneously? Read on to understand how you can go about it.
Home loans are secured loans you may use to purchase a residential property. You must pay a small percentage of the home’s cost as a down payment, and the lender pays the remaining amount as a loan. You pay back this amount to the loan provider in installments over the loan term you select. Till then, the property remains mortgaged with the lending institution.
Personal Loans are collateral-free financing sources that you can use to cover all your unexpected expenses. These loans have no end-use restrictions, making them the best funding source for various purposes, including the following:
Additional Read: Reasons for Personal Loan Application Rejection
In the case of a home loan, the purchased property works as collateral until you pay off the loan completely. Personal loans are unsecured and you can avail of them without any collateral, security, or guarantor.
Personal loans have higher interest rates than home loans because they are unsecured loans with more lending risk to the lender.
Personal Loans have shorter repayment terms than Home Loans.
Home loans provide higher loan amounts than Personal Loans.
Yes, it is possible. You have no upper limit to the number of loans you can avail of. You can borrow both loans simultaneously as long as you meet the lender’s eligibility and documentation requirements, in addition to having the repayment capacity to pay off timely EMIs. Checking these requirements is crucial before applying for any loan.
In fact, borrowing a Personal Loan and a Home Loan simultaneously is a helpful strategy. You can use the Home Loan to finance the property purchase and the Personal Loan to make the down payment, spruce up the interiors, or conduct any necessary repairs before moving. Before opting for the duo, remember that you have a solid credit history.
These are a few factors you must consider before taking both loans at the same time:
Before approving each loan, lending institutions will pull a hard inquiry on your credit report and look into your credit score to ensure that you can handle both loan repayments diligently. If you want to borrow both loans simultaneously, you must show a stellar credit history with a high repayment capacity.
A credit score is a 3-digit number that reflects your repayment history and credit handling calibre. A score above 700-750 is favourable to getting loan approvals without hassle. Check your credit score using an online app like OneScore and ensure it meets the lender’s requirements to evaluate your credibility. A high credit score becomes fundamental when you plan to take two loans simultaneously, especially when one of them is unsecured.
Ideally, the debt amount you service each month should not exceed 50% of your in-hand income. That means the EMIs, including those for Home and Personal Loans, should not consume more than 50% of your monthly earnings. Lenders understand that you will need the remaining 50% to cover your living expenses. A high DTI ratio projects you as a high-risk borrower, diminishing your chances of approval for both loans simultaneously.
You will need adequate disposable income to manage two loans effectively at the same time. You must address both EMIs simultaneously without stressing your monthly budget. Opt for a lender providing flexible repayment terms on their loans. Such lending institutions allow you to select a tenure of repayment with EMIs you can easily afford. Knowing the EMIs and keeping them under budget makes repayment easier to manage.
You may demonstrate a strong repayment capacity by applying for a joint loan with your parent or spouse. Applying for a joint loan improves your chances of getting approvals without increasing the interest rates. When the loan application involves the income and credibility of two borrowers, lenders gain assurance of timely repayments. The same applies when you seek two loans at a time.
Paying off two loan EMIs each month can be challenging if you haven’t planned your finances well. Therefore, ensure that you clear all existing debts before applying for more loans. Understand the pros and cons of handling two loans at a time so that you can avoid any unfavourable consequences later. Additionally, using a Personal Loan EMI calculator is a smart idea to see if you can handle the installments efficiently each month. After checking all the terms and conditions, apply for the required loans and get the funding after planning your finances.
Borrowing a Home Loan and Personal Loan together helps cover the various costs involved in a home purchase. It would be best if you planned your finances wisely to avoid any stress later.
Yes, you can take a home loan if you already have a personal loan, as long as you fulfil the lender’s eligibility criteria, documentation requirements, and other conditions.
If you have successfully settled a personal loan, you can certainly get a home loan afterwards. That is because a home loan is a secured loan that does not involve the risk of default for the lender.
You can clear an outstanding home loan balance with a personal loan if the lender allows. However, evaluate your finances and ensure you can pay your EMIs on time before applying.
Yes, you can take a home loan twice if you prove sufficient income and low financial obligations to the lender.
The EMIs going beyond your budget is the biggest risk when taking multiple loans at the same time. Moreover, doing so increases your debt-to-income ratio and hampers your monthly budget. If you fail to pay a few EMIs on time, it will impact your credit score negatively. So, think twice before applying for multiple loans simultaneously.
**Disclaimer: The information provided in this webpage does not, and is not intended to, constitute any kind of advice; instead, all the information available here is for general informational purposes only. FPL Technologies Private Limited and the author shall not be responsible for any direct/indirect/damages/loss incurred by the reader for making any decision based on the contents and information. Please consult your advisor before making any decision.
- OneScore , December 07, 2023