It is the dream of everyone to have a home that he/she can call his/her own. Many people save all their lives to buy a dream home, while some are unable to do that.
However, with an apt funding facility like the home loan available at a lower interest rate, even middle class and salaried people can cherish a home dream.
But, even a home loan lender does not approve of the 100% value of the home that you wish to buy.
Yes, home loan creditors such as banks, non-banking finance companies (NBFCs) and others offer only up to 80-85% of the cost of a new home as the loan amount. The remainder of the money 15-20% needs to be arranged by a homebuyer.
It is known as the down payment. Considering the higher amount of homes these days, some people even don’t have funds to pay for a down payment.
Thus, a question arises whether one can use an unsecured personal loan to pay for the down payment or not.
If you are such a homebuyer who is considering an unsecured personal loan to pay the home loan down payment, then this post is for you. Read on!
While a personal loan is easy and quick to acquire as you get the money disbursed into your bank account soon, you need to consider some points. It is especially before applying for it for making way for a home loan down payment.
1. Its impact on your Credit Score
Taking two different loans within a short span will show that your finances are not in order. It will also denote that you rely on credit to fulfil most of the financial goals. The Credit bureaus may consider it as a limiting factor. Therefore, it may lead to a lower CIBIL Score.
2. Its effects on your living costs
When you have two EMIs to pay, it may also lead to other expenses in life. You may need to pay a vital portion of your monthly towards both loan EMIs. Thus, it is another factor that you should look at before opting for an unsecured personal loan.
3. Higher interest rates
Personal loans are unsecured which means not pledging any collateral to acquire it. It is offered at a higher interest rate by a lender to cover the default risk. Hence, personal loan interest rates may be between 12-24% as compared with 8-9% on home loans. As a result, you should calculate the overall cost of the personal loan.
Having two loans active may help you enjoy a larger tax deduction. But the focus should be on paying off both loans without hampering your monthly budget.
If you can do that without issues, then applying for an unsecured personal loan to pay for your home down payment is a smart move.
Many leading online lenders including Bajaj Finserv come with pre-approved deals on personal loans, home loans, credit cards, EMI finance and others as well. You can opt for such an offer to make your loan procedures simple yet faster.
You can submit a few of your basic personal credentials such as your name and contact number to check out your pre-approved loan deals now.