Is Personal Loan For House Down Payment Right or Wrong?

Is taking a personal loan for the down payment of your home loan the right choice you can make? Read to know the various things you must know before taking this decision!

22 Nov,2022 17:47 IST 2186 Views
Is Personal Loan For House Down Payment Right or Wrong?

Everyone dreams of owning a house to live with their family. However, the real estate market fluctuates daily, pushing the thought of owning a home even further with every passing day.

Although you may have enough liquidity to purchase real estate, it is wise to spend only a portion of your savings to create some financial leeway in an emergency. However, one can raise capital from external sources to buy a home in the event of limited liquidity.

Individuals opt for a home loan as it is dedicated to the needs of individuals to buy a house. However, like every loan, lenders require borrowers to provide a down payment (a specific portion of the desired loan) to approve their loan.

For example, if you seek a home loan of Rs 40 lakhs, the lender may require you to make a down payment of Rs 5-10 lakhs. But what happens when you want a home loan but do not have the required down payment amount? Can you use a personal loan for a down payment?

Taking A Personal Loan For A House Down Payment

If you want to buy a house with limited savings, you can raise adequate capital with a home loan. However, individuals hesitate to apply for a home loan as they know they will have to make a down payment of around 10% of the desired loan amount. In such cases, the only source of capital is a personal loan.

Lenders offer personal loans to individuals to cover their expenses without defending their usage. For example, if you avail of a personal loan, you can use it to pay for college, marriage, vacation, etc., without any end-use restrictions. Since there are no restrictions on where you can use the loan amount, you can use it to make a down payment for your home loan.

Taking a personal loan for a home down payment leaves two loans the borrower can pay simultaneously without shelling out the down payment amount from the savings. Since there are no usage restrictions on loan amounts taken for personal objectives, individuals think they can use this amount to make the down payment.

But is taking a personal loan for a mortgage down payment a good idea, or should you avoid it?

Should You Take A Personal Loan For House Down Payment?

You can take a personal loan for a home down payment to ensure that your home loan gets approved by the lender. However, before taking a personal loan for a down payment, you should consider the following factors.

• Capital Need

Personal loans offer a lower amount than a home loan, as the former is ideal for covering small personal expenses. However, if you want to buy a home and have been saving for it through a dedicated fund, you can consider your options to raise the remaining amount through a single personal loan.

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For example, if you want to buy a house for Rs 30 lakhs and have 25 lakhs saved already, you can take a personal loan of Rs 5 lakhs rather than a home loan, as the terms are more flexible.

• Loan Repayment Ability

When you take a loan for a down payment on the home loan, you create two financial obligations–repaying the personal loan and the home loan. Hence, it depends on your repayment ability and how much you can repay.

If your repayment ability is Rs 30 lakhs, and you are taking a home loan for Rs 25 lakhs, it is wise to take the remaining amount as a personal loan. However, if you take a home loan for Rs 30 lakh, you should not take a personal loan as you may default on the repayment.

• Existing Credit

Avoid taking more debt when you have existing obligations pending repayment. Creating more financial commitments can lead to defaults in an unplanned financial emergency. Hence, take a personal loan for a mortgage down payment if you do not have multiple repayment liabilities.

Avail Of An Ideal Personal Loan For Home Down Payment From IIFL Finance

IIFL Finance provides comprehensive and customised personal loans to fulfil your capital requirement. The personal loan offers instant funds up to Rs 5 lakh with a quick disbursal process which you can use to make a down payment on your home loan. You can apply for the loan online or offline by visiting IIFL Finance nearest branch and verifying your KYC details.


Q.1: Can I take a home loan from IIFL Finance?
Ans: Yes, you can take a home loan up to Rs 2 crores in under 25 minutes from IIFL Finance.

Q.2: What is the loan tenure for IIFL Finance personal loan?
Ans: When taking a personal loan from IIFL Finance, borrowers can choose from a loan tenure between 3 and 42 months.

Q.3: How much can I raise through IIFL Finance loan from personal expenses?
Ans: You can raise Rs 5 lakhs maximum. IIFL Finance will disburse the amount into the bank account within 24 hours.

Zaroorat aapki. Personal Loan Humara
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Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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