personal loan for house down payment

Can You Use a Personal Loan for Down Payment of a House?

May 09, 2024 • 489 views

When you take a home loan, you need to make a down payment. But what if you lack the necessary funds for a down payment? Can you use a Personal Loan for a down payment? Let’s find out!

Can You Take a Personal Loan for a Down Payment on a House?

Yes, you can get a Personal Loan and utilise the funds to make a downpayment on a house. Personal loans come with no end-use restrictions, allowing you to use the funds based on your needs.

Benefits of Taking a Personal Loan for a Down Payment

Here are some of the benefits of taking a Personal Loan for a down payment on a house:

1. Saves Your Emergency Funds

Dipping into your emergency fund for a down payment can leave you vulnerable to unexpected financial situations. A Personal Loan allows you to access funds for the down payment while keeping your emergency savings intact.

2. Minimal Documentation

As a Personal Loan approval is based on your creditworthiness, you need to provide only basic documents during application process.

3. Flexible Repayment Schedule

A Personal Loan offers flexible repayment terms, with tenure between 12 to 60 months. You can choose a tenure that aligns with your budget and comfort level. Use an online Personal Loan EMI calculator to estimate your monthly payments and find the ideal loan term for you.

4. Collateral-free

Personal loans are collateral-free, and you do not need to pledge any asset as security. If you lack the downpayment for a house loan, a Personal Loan may be suitable for you.

5. Quick Disbursal

A Personal Loan often has a simpler application process compared to other types of loans. With good employment status, income, and credit score, you may receive the loan amount instantly, expediting your homeownership journey.

Also Read - What are Benefits of having Personal Loan for Home Improvement?

Factors to Consider Before Applying for a Personal Loan for Down Payment on House

Here are some factors to consider before applying for a Personal Loan for a house down payment:

  • Interest Rates

As personal loans are unsecured, they have significantly higher interest rates than traditional mortgage loans. This may significantly inflate the overall cost of buying a house. So, carefully assess the impact of interest rate on your long-term finances before applying.

  • Loan Amount

Down payments can be substantial, often reaching lakhs of rupees. Securing such a large sum through an unsecured loan may be difficult.  Some lenders may hesitate to offer such a high amount due to the inherent risk.  Check with potential lenders beforehand for the loan amount you require.

  • Credit Score

A good credit score is essential for securing a Personal Loan with a favourable interest rate. Taking on additional debt can potentially lower your credit score, impacting your borrowing power in the future. So, check your credit score before you apply for a Personal Loan.

  • Verification Process

Given the sizable unsecured loan amount, lenders may conduct a meticulous verification process. This may lead to delayed approval.  Factor in the lender’s disbursement timeline to avoid missing your down payment deadline.

Also Read - Maximizing Your Savings: Tax Benefits of Home Renovation Loans

To Conclude

Using a Personal Loan for a down payment on a house can be an option to bridge the gap. Personal loans have a quick disbursal process, are collateral-free, and allow high loan amounts with flexible repayment tenure. However, you must consider your credit score, interest rate on the loan, and lender’s verification process before applying for a Personal Loan.

If you are looking for a high loan amount with quick disbursal, choose Poonawalla Fincorp. We offer up to 30 Lakh with minimal documentation at competitive interest rates. Apply now!

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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