The best approach to finance a house purchase is through a home loan. It enables you to purchase your dream home while maintaining your financial security. Homebuyers, on the other hand, frequently go over budget. It might be anything from a down payment to the cost of refurbishment.
You won’t have to dive into your savings to afford the extra costs in these circumstances. A personal loan is another possibility. Personal finance can help you pay for all of your unexpected expenses.
There are no limits to how many loans you can take out as long as you can pay them back on time and in a systematic manner. You must, however, examine your repayment capacity and only take out a loan after determining how much EMI you can reasonably afford.
However, there are a few things to consider before applying for a second loan.
Your credit score is based on how well you’ve paid back your debts. A credit score of 700 or above will place you in good standing with a lender and make it easier to obtain loans.
Assume you have a home loan and require a personal loan. In such an instance, obtaining another loan will necessitate a clean credit history. Paying your house loan and credit card obligations on time is the best approach to improve your credit score. This may also assist you in obtaining low-interest personal loan rates.
Debt to income ratio
Lenders assess how effectively you’re managing your home loan EMIs with your present salary in addition to your credit history. A lender might not grant you another loan if you already have one. The amount you pay on loan servicing each month should ideally not exceed 50% of your monthly income. This is due to the fact that the larger your debt-to-income ratio is, the less financial flexibility you have. Such a scenario is frequently seen adversely by lenders.
In this instance, it’s preferable to show that you’re more capable of repaying the loan. You can do so by applying for a loan alongside your parents or spouse. You’d have a much better chance of getting a second loan if you had two heads.
To be eligible for a Personal Loan, you must meet specific conditions. Personal loans are easier to obtain through the bank where you have a salary account. The repute of the company for which you work also influences your eligibility. Self-employed people who have a positive relationship with the bank where they have a current account have a better chance of getting a Personal Loan.
If you already have a home loan, a second loan might be a big financial strain, even if you have a favorable DTI ratio and credit score. As a result, you must first assess your financial responsibilities and if you can meet them with two loans.
Combining a personal loan and a house loan might help you finance your home without draining your savings. To avoid financial hardship, though, you must plan your two loans carefully. Overall, a Home Loan and a Personal Loan can be combined if you understand the qualifying criteria of each bank, the rate of interest, and your own capacity to make monthly payments.