Home loans, personal loans: This idea is not known to many. But in fact, if you look closely, a personal loan can actually help you with the home loan down payment. Yes, it is true that personal and home loans are very different, the former is taken for small purposes like travel, marriage, emergency needs, etc. While, on the other hand, home loans are taken with an initiative to purchase dream home. Both personal and home loans have different terms, interest rates, and PMI levels. Interestingly, Aditya Kumar, Founder and CEO of Qbera.com says, “Taking out a personal loan to pay down your home loan is a great idea for many reasons.”
According to Kumar, home loans are big-ticket secured loans where the property serves as collateral to secure the loan amount. Banks and NBFCs offer home loans to workers and the self-employed after deeming them creditworthy. Home loan terms can range from 5 to 30 years, and consumers have the ability to select a reasonable term based on their ability to repay.
In addition, banks usually only finance around 80 percent of the market value of the property due to the significantly high amounts – almost all banks do not go beyond the 80 percent mark and require the applicant to make a down payment. The choice is entirely up to the applicant and the applicant can choose to pay any percentage of the property value for the down payment.
Kumar advises paying as much as possible on the down payment and reducing the bank’s percentage of the financing, since interest on home loans accumulates massively over a long period of time. For example, if you took out a home loan of Rs. 1 crore for 30 years, you would pay an amount in excess of the principal for interest. This is intended to reduce the interest burden over the term.
The most obvious reason for using the personal loan method to support mortgage debt is to cover at least 20% of the down payment amount in case you don’t have the money.
Apart from that, according to Kumar, there are few other reasons as well. Let’s find out!
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You don’t have to use up your savings: In the recent past, there has been a widespread trend to save up for building society savings. But with a personal loan, you don’t have to use up a large chunk of your savings. This gives you enough leeway for stress-free financial maneuvering – and of course it’s always healthy to have a decent savings budget.
It Can Be Running Simultaneously With Your Home Loan: You can have an ongoing home loan and a personal loan at the same time, and pay your EMIs at the same time. In addition, you can get a personal loan from the same bank at a much lower rate than the rate prevailing in the market.
Flexible Term: Another great reason why a personal loan can be a great solution for paying down a home loan is that you can choose the term of your choice, from 1 year to 5 years. You also have the option to make partial payments, get a top-up, or complete your loan before your term ends.
Wide Range of Loan Amounts: Don’t worry if your 20% deposit is Rs. 10,00,000. Banks, Fintechs and NBFCs are offering loan amounts up to Rs. 25,00,000.
Instant Approval: Nowadays, applying for a personal loan from the right lender can get you instant approval. After the digital document check, you can expect to receive your amount within 24 hours!
So why worry about how to pay off your home loan debt when you can use a personal loan as a medium. By using the latter method, you will also reduce your EMIs and actually be able to pay off your debt before it is due.