Why shouldn't you Take a Personal Loan to Make the Down Payment for the Property?
Jun 28, 2017 Home Loan
There are various endless reasons why a home buyer should make a proper saving before buying a house. The banks give out a home loan as much as 80 percent the cost of the property. The rest 20 percent has to be paid by the buyer from his own pocket. These include the stamp duty, registration cost as well. But if the buyer does not have a considerable saving to pay the down payment and he considers taking a personal loan for the same, it might not be such a good idea.
We discuss everything you need to know about it:
The interest on personal loans is much higher as compared to the home loans. The current interest that the biggest bank of the country State Bank of India charges an interest of 8.35 percent for a home loan for the properties up to Rs 30 lacs. For properties more than Rs 75 lacs, the interest charged is 8.65 percent. The interest rate for the personal loan is much higher. Banks and lending institutes in the country charge anything between 11 percent and 20 percent for personal loans.
Since the personal loans are unsecured loans, therefore they have higher interest rates.
If you work for a credible organisation banks like SBI charge you interest from 11.90 percent to 14.50 percent Whereas, if you work for a less credible company, the banks will charge you interest of 12.65 percent to 14.75 percent for the personal loans.
If you combine both the interest of the personal loan and home loan the cost of the property will increase substantially. Banks and generally advise and expect you to not pay more than 40 percent of your total monthly income to pay monthly EMI. Both the loans will imbalance your savings and household expenses leaving very little or nothing for savings. For example, the buyer wants to buy a property worth Rs 30 lacs, the banks will give out a loan of Rs 24 lacs, as it is 80 percent of the total property. The rest 6 lacs, the buyer has to pay himself. Let’s say that the buyer takes a personal loan from the bank to pay these Rs 6 lacs. The interest rate for the personal loan is 11.90% and the loan duration is 4 years, the monthly EMI for the same will be Rs 15,771. For the home loan at the rate of 8.35 percent for 20 years, the monthly EMI will be Rs 20,600. The total EMI that you will have to pay will be around Rs 36,371 and according to banks, to pay such EMI, your monthly income should be Rs 91,000, as the sum of EMIs should not increase 40 percent.
If your monthly income is less than mentioned then you may have to slash down your home loan amount to maintain the ratio.
Taking two loans simultaneously will imbalance your monthly expenditure.
Be mindful of the fact that you will not be able to take another loan in case of emergency.
There are tax benefits for the personal loan if it is taken to pay the down payment for the property or for renovation purpose. The borrower can claim a tax benefit up to Rs 2 lacs.
We discuss everything you need to know about it:
The interest on personal loans is much higher as compared to the home loans. The current interest that the biggest bank of the country State Bank of India charges an interest of 8.35 percent for a home loan for the properties up to Rs 30 lacs. For properties more than Rs 75 lacs, the interest charged is 8.65 percent. The interest rate for the personal loan is much higher. Banks and lending institutes in the country charge anything between 11 percent and 20 percent for personal loans.
Since the personal loans are unsecured loans, therefore they have higher interest rates.
If you work for a credible organisation banks like SBI charge you interest from 11.90 percent to 14.50 percent Whereas, if you work for a less credible company, the banks will charge you interest of 12.65 percent to 14.75 percent for the personal loans.
If you combine both the interest of the personal loan and home loan the cost of the property will increase substantially. Banks and generally advise and expect you to not pay more than 40 percent of your total monthly income to pay monthly EMI. Both the loans will imbalance your savings and household expenses leaving very little or nothing for savings. For example, the buyer wants to buy a property worth Rs 30 lacs, the banks will give out a loan of Rs 24 lacs, as it is 80 percent of the total property. The rest 6 lacs, the buyer has to pay himself. Let’s say that the buyer takes a personal loan from the bank to pay these Rs 6 lacs. The interest rate for the personal loan is 11.90% and the loan duration is 4 years, the monthly EMI for the same will be Rs 15,771. For the home loan at the rate of 8.35 percent for 20 years, the monthly EMI will be Rs 20,600. The total EMI that you will have to pay will be around Rs 36,371 and according to banks, to pay such EMI, your monthly income should be Rs 91,000, as the sum of EMIs should not increase 40 percent.
If your monthly income is less than mentioned then you may have to slash down your home loan amount to maintain the ratio.
Taking two loans simultaneously will imbalance your monthly expenditure.
Be mindful of the fact that you will not be able to take another loan in case of emergency.
There are tax benefits for the personal loan if it is taken to pay the down payment for the property or for renovation purpose. The borrower can claim a tax benefit up to Rs 2 lacs.
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