Most of us plan and avail a certain amount of Home Loan to buy and build a home of our dreams. However, seldom do the expenses remain within the anticipated budget and we invariably end up spending 20% to 30% higher amount on the construction, particularly due to some last minute alterations, changes or additions.
To meet the additional cost, one may either choose to liquidate savings or use multiple credit cards or opt for small loans. A series of additional loans or credit balance will be an added burden, because you are already paying regular EMI towards Home Loan. Because of increased debt, one might be able to pay back only a minimum amount towards the credit card outstanding. Rolling over credit card amounts can attract hefty interest rate and finance charges which can eventually pile up your existing debt burden.
Tip: Best Home Loan for Salaried Person before applying for a loan
It is recommended to opt for a planned loan Instead. Most banks and NBFCs offers Top Up on Home Loan to their existing customers. To apply for a top-up loan, you must already have Home Loan for more than one year. These top-up loans come at better interest rates on home loans, which is lower than Personal Loan.
However, if you are not eligible for the same, Personal Loan is one of the most hassle-free bank loans. Despite your existing Home Loan account, your application for Personal Loan can be approved by your bank. Even though a Personal Loan is often more expensive than a Home Loan, it works out to be cheaper than a Credit Card debt. You can borrow the same from the existing lender or some other lender.
There are no restrictions on the number of loans a person can avail, as long as you have a capacity to repay timely and systematically. However, you must assess your repayment capacity and avail a loan only after calculating how much EMI you can afford comfortably.
A debt is a responsibility and thus decision to borrow should always be carefully assessed.
You must understand that a Personal Loan is an unsecured loan and it is disbursed solely based on your creditworthiness. It does not call for pledging any security for availing funds.
They are a bigger risk for the lender as compared to a home loan which is a secured loan. This is why it attracts a higher interest rate on home loan and requires a higher credit score compared to secured loan. However, it still holds an advantage as one has the flexibility to use it for any purpose.
You must use online EMI Calculator and understand the burden of the additional loan before signing the loan agreement. It is equally important to understand how long you want to pay additional EMIs. Have a repayment plan in place and try to build an emergency fund along. In case you want to prepay, have a clear strategy for the same.
Tip: 50 Lakh Home Loan EMI Interest Rate 2022 before applying for a loan
You must meet certain eligibility criteria to Avail Personal Loan. It is easier to obtain the Personal Loan with the bank you have salaried account with. Your eligibility also depends on the reputation of the company you are working for.
Self-employed individuals with a good relationship with the bank where they have a current account also have a better chance for Personal Loan approval.
Lenders check applicant’s credit score, income, other outstanding loans etc to assess further Personal Loan Eligibility.
As a rule of thumb, personal loan repayment should be within 10% of take-home pay. The debt to income ratio considering all loans together should not exceed 40% to 50% of the take home salary of the applicant.
Most lenders will be willing to extend from Rs 50,000 to Rs 30 Lakhs of Personal Loan depending on the age group, income, employer’s, and repayment capacity.
If the applicant has Home Loan with EMI repayment of Rs 50,000, which is 50% of her take-home pay, she will not be eligible for a further loan. If she has Home Loan EMI at Rs 40000, then she is eligible for Personal Loan to the extent of Rs 10000 instalment per month.
The CIBIL Score should be more than 750 for Personal Loan which is certainly higher than a Home Loan.
Individuals in the age group of 21 to 30 years, who have better earning and repaying capacity, are considered better for the higher loan amount and higher tenure period. A young borrower can leverage this in her favour and may opt for a lower burden on monthly repayment.
Many banks offer better rates to customers with good credit score and better income.
In all, Home Loan and Personal Loan can be availed together after understanding the respective bank’s eligibility criteria, the rate of interest, and own capacity to serve monthly repayment.
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