Understanding Personal and Home Loan
Personal loans are unsecured loans that require the presence of a good credit score for approval. When you apply for personal loan, the received amount can be used for a variety of purposes, including but not limited to debt consolidation, education, medical emergencies and others.
Home loans are secured loans availed against a property or a house. When you apply for home loan, it is easily granted against the property documents. These loans also have low interest rates owing to the presence of collateral. Individuals can also opt for longer repayment tenures with a range of 10 to 30 years for better EMI management.
When to Consider Personal and Home Loans Simultaneously?
The home purchasing costs encompass a variety of urgent and necessary expenditures. It includes down payment, house purchasing registration charges and fees. Around 20% is required as an upfront cost, and the charges and fees can be around 5 to 7% of the property value. This is apart from other costs. Since all of it may not be covered by a home loan, the need to meet the expenditures can be fulfilled when you apply for home loan. Hence, the simultaneous application of personal and home loans is considerable and recommended in such situations.
Factors to Maintain for Personal and Home Loan Approval
Certain aspects must be fulfilled to ensure acceptance of personal and home loans. These include:
Credit Score
The credit score speaks for your ability to repay the loans. Keeping it as high as possible offers a positive impact on your finance management abilities and increases the chances of loan approval. The applicants must possess a score of 750 or above before applying. If it's not there yet, take measures to improve the same.
Employment and Income Status
A stable and good income is the key to determining the payback ability. Lenders essentially check these parameters before approval. Another important factor preferred by lenders is the Debt to Income ratio of 40 to 50%. This means that the overall debts to be paid must not exceed 50% of your income. It helps keep a balance in regular expenditures and paying the EMIs, posing you as a low-risk candidate.
Joint Application
Applying with the spouse or parent exhibits the presence of more than one income source. It increases the safety profile and hence enhances the chances of loan approval.
Don'ts With Personal and Home Loan
When you apply for home loan along with a personal loan, it becomes a responsibility to be fulfilled with planned decisions. Hence, avoid taking the following actions:
- Using the amount in risky investments which can eventually increase the payment burden
- Spending the amount on non-productive and expensive items that do not add any value
- Not keeping the funds for emergency
Benefits of Taking Home and Personal Loans
Opting for the mentioned two instant loans can be challenging to manage. However, with proper planning, it can offer numerous benefits as well. Here are a few of them:
- Eases meeting different personal urgent and necessary financial needs
- Helps to avail of higher loan amounts
- Loans’ premiums can be claimed for tax benefits under Section 80C and 24B of the Income Tax Act
- Effective management, like timely loan payment, improves different types of credit scores as well
Conclusion
Meeting the finances while planning a major event can be challenging. Simultaneously opting for different loans can be an intriguing option, but it is thought-worthy as well. Encouraging you in the endeavour, applying and getting approved for the two loans is possible. However, it must be coupled with well-thought-out planning for managing finances. Set the EMIs and principal amount depending on the monthly income and expenditures. Also, do not hesitate to take the help of an expert to further ease your overall journey.