Can I Take a Home Loan and a Personal Loan Together?

It does not matter how many loans and which type of loans you already have, if you meet your lender’s income and eligibility requirements, you will be sanctioned another loan. However, repaying two loans is no easy task and there are a few things you must keep in mind if you are planning to avail of a Home Loan and a personal loan together.

Things to Keep in Mind While Availing of a Personal Loan and Home Loan

Consider Opting for a Top-up Loan 

These days, most lenders give borrowers the option of availing a Top-up Loan on a Home Loan. If you need money to cover your interior cost or expand your business, you must consider availing a Top-up Loan instead of a personal loan first. Top-up Loans offer several advantages over personal loans. 

To start with,Top-up Loans are low-interest loans. One can expect to pay 1% to 2% higher interest rate than what they are paying on their Home Loan. Personal loans, on the other hand, are quite expensive. The interest rate on these loans varies between 12% and 25%. Further, while one must pay personal loans within 5 to 7 years, Top-up Loans come with a long repayment tenor. The repayment period for a Top-up Loan would be the same as that for your Home Loan. However, one can avail of a Top-up Loan only after they have paid a certain number of EMIs and have been a reliable borrower.  

If you meet these conditions, apply for a Top-up Loan instead of a personal loan.  

Also Read: Is Opting for a Top-up Home Loan Better than an Education Loan? 

Maintain a Good Debt-to-Income Ratio

If, for some reason, you cannot avail of a Top-up Loan and have decided to go with a personal loan instead, make sure your debt-to-income ratio is around 40%. It should, in no way, exceed 50%. 

What is the debt-to-income ratio? The debt-to-income ratio refers to the ratio of all of one’s monthly debt payments and gross income. In other words, when you divide all your EMIs by your total net income, you get your debt-to-income ratio.  

Can an individual get a personal loan and Home Loan together? The answer is yes. However, a lender will sanction a second loan only when an individual’s debt-to-income ratio is under 40% to 50%. In simple words, if your current liabilities exceed 50% of your total income, your lender will perceive risk in lending you money and therefore, it is quite unlikely that you will get a second loan.  

Maintain an Excellent Credit Score 

If you already have a Home Loan and you wish to add to this responsibility, the responsibility of repaying a personal loan, know that a lender will approve your application only when you have an excellent credit score.   

When it comes to Home Loans, lenders sanction loans to individuals with CIBIL scores in the range of 700 and 725. However, if you want two loans at the same time, you must convince your lender of your creditworthiness and repayment capacity and the best way to do that is to maintain an excellent score. Want to opt for a Home Loan and a personal loan together? Maintain a CIBIL score of 750 plus.  

Read Also: How to Pay Off Your Home Loan Quicker 

Borrow What You Can Easily Repay

This is the first rule of borrowing: borrow what you can easily repay. Paying off two loans is no easy task. If you think it will be hard for you to pay the EMIs of both loans simultaneously, it is recommended that you take only one loan and go for interiors after a few months or years when you have built up some savings.  

Let us now look at the eligibility criteria and document requirements for Home Loan. Since Home Loans are big-ticket loans that go on for years, lenders are more stringent about potential borrowers meeting eligibility and document requirements for these loans.  

Read Also: Know How Mortgage Loan Affect Your Cibil Score 

Document Required for a Home or Personal Loan

Whether you are applying for a Home Loan, know that preparing in advance will help you experience a hassle-free loan application process. So, whether you are applying for a Home Loan or a personal loan, keep these documents ready with you:  

• Mandatory documents such as PAN card or Form 60 

• KYC documents (i.e. address and identity proof documents, such as Aadhar, Passport, Driving License, utility bills, etc.)  

• Passport-size photographs 

• Form 16 or latest salary slips (for salaried individuals)/ TR Document and P&L Statement for the last 2 years (for self-employed individuals) 

• Bank account statements for the last 6 months 

• If you are a self-employed applicant, you must provide documents for proof of business that establish a minimum of 5 years of business vintage. 

Please note that personal loans are approved and processed more easily than Home Loans and therefore, if you are just applying for a personal loan, you may not need these documents. However, if you are applying for a Home Loan, your lender may ask you for more documents, over and above these.  

*Terms and conditions apply.