Buying a house in India is an indication of financial and personal independence. It is generally advised that you avoid using credit to make your home down payment, especially when you are taking a home loan to finance the complete purchase. However, sometimes credit may be your only option, as the minimum down payment for a home loan in India can be anywhere between 15% to 20% of the property value. In that case, an instant personal loan is an easy way to meet your needs.
Things to consider while using a personal loan for your home down payment
The increased total cost of the property purchase
An important factor to be wary of about personal loans is that they carry a higher interest rate than secured loans.
Due to this, you are advised against using it to buy a property or make a down payment because it increases the total cost of the property purchase by quite a large sum. For example, if you require Rs. 7 lakh and you secure it via a personal loan on a 36-month tenor at a nominal interest rate of 12%, you would still end up paying Rs. 1.37 lakh as interest by the end of your tenor, effectively making your house purchase costlier.
Personal loan sanction
Before you opt for a personal loan, you must check with the lender’s maximum sanction amount. As a down payment can run into lakhs, you must opt for a lender that offers a sizeable sanction that can comfortably meet your need.
Factors that affect the personal loan sanction
Typically, lenders look into your CIBIL score and credit history at the time of application. From it, they gauge whether or not you are creditworthy. Additionally, your credit history also dictates your repayment capabilities and the amount of your existing debt. This is vital to your sanction as lenders check your debt-to-income ratio to ensure that the added obligation will not cause you to default. This is why it is recommended to maintain a ratio below 30% before applying for any credit.
Tax implications applicable
Generally, personal loan payments do not offer tax benefits. However, if you have taken a personal loan for the downpayment on a house, you can claim deductions up to Rs. 2 lakh annually on interest payments made.
It is vital to keep all these facts in mind. It is also important to know that it is unfeasible to use a personal loan to buy a house as lenders refrain from offering high sanctions on an unsecured loan. However, a personal loan is a convenient borrowing tool for a down payment, especially when picking a top-tier lender.
Additional read: Personal loan with bad CIBIL score
The Bajaj Finserv Personal Loan is one such option as it is simple to obtain and offers an ample sanction of up to Rs. 40 lakh to meet your needs comfortably. Furthermore, you can avail of a Flexi Personal Loan and reduce your EMI up to 45% by paying only interest as EMIs for the initial tenor. This can help you manage your cash flow more efficiently and help you maintain healthy finances.
To get started right away, check your pre-approved offer online to get access to a personalized loan.
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