Owning a home is a dream most of us look forward to as it enhances financial independence and stability. But while making that down-payment for your home some of you may wonder if using a personal loan is an option. The idea of tapping into a personal loan to bridge the gap might seem appealing, but is it the best route to take? Let’s explore the possibilities and considerations in this blog.
Yes, you can use a personal loan for a house deposit, but should you do so?
The short answer is yes, you can use a personal loan for a house deposit. Most lenders won’t dictate how personal loan funds should be used, so you’re free to apply the money where you need it. But just because you can doesn’t always mean you should.
Getting a personal loan for house deposit could make your mortgage approval process more difficult. When you fill in a application for personal loan and later on for mortgage, lenders will consider overall health of your finances, as well as your debt-to-income ratio. Adding a personal loan to your debts might make you ineligible for the mortgage or receive less favorable terms. That’s why you should think twice before taking this route.
What Is a House Deposit?
A house deposit, also known as a down payment, is an upfront amount of money you pay when buying a house. It is a percentage of the total purchase price and shows the mortgage provider you’re serious about the purchase. The size of your deposit impacts what kind of mortgage deal you’ll be offered and how much you’ll likely have for monthly mortgage repayments. In general, the bigger your deposit, the better the mortgage deal and the smaller your monthly repayments.
Considerations Before Taking a Personal Loan for a House Deposit
Before diving into the process of securing a personal loan for a house deposit, consider the following key factors:
- Interest Rates: Shop and compare interest rates from different lenders to help ensure you’re getting the best possible rate. Even a small difference in your interest rate can save you money over the life of a loan.
- Loan Amount: Only borrow as much as you need for the down payment. Borrowing too much will lead to unnecessary debt and financial stress.
- Repayment Terms: Selecting a tenure for repayment should be as per you’re paying capacity, not putting a burden on you being a monthly obligation.
- Fees and Charges: Be alert to other costs that may be involved e.g processing fees, prepayment penalties et cetera.
- Credit Score: Having a higher credit score increases the chances of you getting a loan with better terms. Remember to check your credit score before proceeding to apply.
Required Documents for a Personal Loan for a House Deposit
To apply for personal loan for a house deposit, you’ll need to provide the following documents:
- Identity Proof: Aadhar Card, Passport, Driver’s License, etc.
- Address Proof: Utility bills, Rental agreements, Aadhar card, etc.
- Income Proof: Salary slips, income tax returns, bank statements, etc.
- Employment Proof: Employment Certificate, Offer Letter, etc., for those who are employed.
Eligibility Requirements for a Personal Loan for a House Deposit
Before applying for a personal loan, ensure you meet the following eligibility criteria:
- Age: 21 to 60 years
- Income: Minimum Net Monthly Income of Rs. 15,000 for salaried, and Annual Turnover of Rs 20 lakhs for self-employed.
- Credit Score: Minimum score of 650
- Debt-to-Income Ratio: Should be within acceptable limits
- Employment Stability: Consistent job history is preferred
- Residency: Must be a Resident Citizen of India
Steps to Apply for a Personal Loan for a House Deposit
Ready to move forward? Here’s a simple step-by-step guide to apply online personal loan for your house deposit:
- Visit Ruloans Website: Check your eligibility and explore your loan options on the Ruloans platform.
- Gather Required Documents: Collect all necessary documents, including identity proof, income proof, and property documents.
- Fill Out the Application Form: Complete the personal loan application form and submit it along with your documents.
- Wait for Approval: Your application will be reviewed by the lender. Upon approval, the loan amount will be credited to your bank account.
- Proceed with Your Deposit: With the loan amount in hand, you can now make your house deposit and take the next step towards owning your dream home.
Final Thoughts
Navigating the financial aspect of homeownership can feel overwhelming, but it’s manageable with some good resources and a bit of help. To answer your question, yes, you can take out a personal loan for your down payment on a home. But before you consider it, make sure to examine everything–how this will impact your other debts and the approval on a mortgage if you need one.
