Buying a home is a lifetime decision and such decisions are better taken with a lot of preparation in advance. The preparation of a home buying includes making oneself eligible for a home loan, getting all your documents ready, searching for the property and arranging liquid fund for the down payment of the home.
A home loan down payment is the amount which a home buyer has to invest from his own wallet. The maximum amount one can avail as a home loan is the 80 percent of the property value. The rest of the 20 percent has to be paid by the home buyer which is called the down payment of the property. A home loan down payment is one of biggest expenses which has to be done from one’s one pocket.
Many a time, home loan borrowers find it difficult to arrange the down payment of the property. If the property you want to buy is a high priced one, the down payment will go high. One of the best ways to arrange down payment of a home loan is a Personal Loan.
A personal loan can definitely be used for a home loan down payment as it is a collateral free loan. Only if you possess the repayment capacity, you can easily avail a personal loan. But before you apply for a personal loan for home loan down payment, you must consider some points.
Things to Consider Before Availing a Personal Loan for Home Loan Down Payment
Personal Loans are Costlier
The first thing that has to keep in mind is that a personal loan will be costlier than a home loan. A home loan at present day comes at around 8 percent of interest rate whereas a personal loan interest rate starts at 10.99 percent. The cost of borrowing of a personal loan is much higher than other secured loans. The cost of borrowing can be increased if you opt for a longer tenure.
Personal Loans Come at a Maximum of Five Years Tenure
A home loan is such a credit which can be taken for as long as 30 years. Unlike a home loan, a personal loan tenure can be of a maximum of 5 years.
You will be Servicing Two Loans at the Same Time
A personal loan for home loan down payment will make you pay two EMIs at the same time. Before you avail the loan, you are to gauge your repayment capacity. You should avail a personal loan only if you are assured of paying both the EMIs regularly. Remember the fact that missing any of the EMIs will make you land in hot water at any given time.
A Personal Loan Used for Down Payment Can Save Tax
One of the best advantages a personal loan for a home loan down payment is that one can enjoy tax benefit while using a personal loan for a home loan down payment. Just like a home loan, one can claim up to Rs. 2 lakh on the interest paid against a personal loan. The same benefits can be availed if a personal loan is used for home renovation.
A Personal Loan Can Save Your Emergency Fund
Availing a personal loan for down payment can make you keep your emergency fund for better uses. Such emergency funds are to be saved to use in emergencies like medical emergencies, sudden travel etc. If you use up your savings for a home loan down payment, you will be left with no savings which can be a risky business.
Maintain Your FOIR
While availing a personal loan for the down payment, make sure that both the EMIs together is not more than 40% of your net take home salary. If it crosses more than that, you may need to make sacrifices in daily needs which are never acceptable. So while availing home loan and a personal loan at the same time calculate the EMIs of both the loans and make sure that you can service both without any financial hiccup.
Personal loans are multipurpose loans hence can be used for any purpose. A home loan down payment is one of the best uses of a personal loan. There are a number of benefits that can be enjoyed while using a personal loan for the down payment. What one needs to be careful is the regular payment of EMIs. If you are disciplined in your personal loan repayment, you can enjoy the best of it.