Can I Get a Personal Loan If I Have a Home Loan?
Last Updated : Nov. 6, 2020, 7:06 p.m.
Wondering whether you can get a personal loan since you are already paying a home loan? Well, you can get the same! Lenders offer a personal loan to individuals having a home loan or any other debt. But what yardstick will the lender apply to decide your personal loan eligibility? The lender will scrutinize your income and savings much more in such a situation.
If you are earning high, getting the desired personal loan amount remains a formality. But if someone may struggle to pay the proposed personal loan EMI amid the ongoing home loan payment, the lender can reduce the loan eligibility. So how will this all work out for you? We will tell you all sequentially. Let’s read and understand this whole process.
So How Will the Lender Assess Your Personal Loan Eligibility?
The moment you apply for a personal loan, it will first check your credit score and the overall repayment history. Since it is an unsecured loan, you need to have a credit score of 750 and above. You can get a loan even with a credit score of 700-750, but the interest rate can be slightly more in that case. Secondly, the lender will go through the repayment track of your home loan and other debt, if you have. It will see the date of payment, instances of skipped or late payment, if any, etc. The personal loan will most likely be approved for those who have a spotless payment record on home loans.
How Will the Lender Decide a Personal Loan Amount for You?
After checking your credit score and repayment track, the lender will check the home loan EMI and how much it constitutes of your Net Monthly Income (NMI). Subsequently, it will calculate the personal loan EMI using the calculator . Given your profile, the lender must have decided the interest rate for a personal loan. You can get this loan for a maximum of 5 years. Now, it will put the loan amount you have applied for and see the EMI that comes. The proposed personal loan EMI and the ongoing home loan EMI and other debt, if you have, should not constitute more than 50% of your NMI.
For example, you earn INR 80,000 monthly and your home loan EMI comes as INR 25,000. The lender would like to sanction a personal loan amount whose EMI will be within INR 15,000. The total of personal loan and home loan EMI i.e. 40,000 would account for 50% of your NMI. But if you have no other debt, the lender can increase the EMI cap beyond INR 15,000 since your income is relatively high.
Someone earning less may get less disbursal so that he/she can pay the EMI of both loans as stated earlier.
But Where Should You Apply for a Personal Loan?
After knowing the extent of personal loan permissible with an ongoing home loan, it’s time you focus on choosing the right lender for the same. The lender you choose should offer you a personal loan at attractive interest rates . As you already have home loan obligations, look for a lower interest rate. Currently, personal loans can be offered at interest rates starting from as low as 10.50% to as high as 25%. You should thus compare the rates and choose the best one for you. Check below the interest rates of top lenders to do the same.
| Lenders | Interest rates (In Per Annum) |
|---|---|
| HDFC Bank | 10.75% - 14.50% |
| ICICI Bank | 10.75% - 19.00% |
| State Bank of India (SBI) | 10.75% - 19.00% |
| Bajaj Finserv | 11.00% Onwards |
| Kotak Mahindra Bank | 10.99% Onwards |
| Axis Bank | 10.49% - 21.00% |
| YES BANK | 11.05% - 20.25% |
| IDFC First Bank | 10.50% - 25% |
How About Going for a Top-up Home Loan?
You can even apply for a top-up home loan instead of choosing a personal loan. Both these loans serve the same purposes such as marriage, education, travel, medical emergency, etc. The one thing where a top-up loan can prove better than a personal loan is the interest rate. Most likely, the interest rate of a top-up home loan will be lower than a personal loan. The top-up loan rate can be higher than the regular home loan rate though.
The lender can allow you different repayment structures for home loans and the top-up amount or have a consolidated repayment structure. Normally, when the interest rate remains the same, the lender adds the outstanding home loan balance and the top-up amount. The tenure of the top-up amount will be the time left for a regular home loan.
But very few lenders come with the consolidated repayment for a top-up home loan. Most keep the repayment different for top-up and regular home loans by charging different rates in the two loans. Let’s check the top-up home loan interest rate of top lenders.
| Lenders | Interest Rates (In Per Annum) |
|---|---|
| SBI | 7.50%-9.70% |
| Bank of Baroda | 7.70%-8.85% |
| ICICI Bank | 6.90%-8.05% |
| Axis Bank | 7.75%-8.55% |
| HDFC Limited | 8.30%-8.80% |
Conclusion
Doesn’t matter whether you go for a top-up home loan or a personal loan, you will have added obligations. As a responsible borrower, you need to pay those diligently and on time. So, redefining your income in the context of two loans will hold the key for you. See the money you are left with after paying these two loans as the income on which you will need to spend from. This way, you could maintain a timely payment routine and stay away from hassles. Also check if you could invest in products like mutual funds despite having two loans. It will only boost your savings and help meet your needs over time.