A home loan is hands down the best way to fund a property purchase. It allows you to own your dream home while keeping your savings intact. However, it’s not uncommon for homebuyers to exceed their initial budget. It can be anything, from the down payment to renovation costs.

In such cases, you don’t need to dip into your savings to cover the additional expenses. There’s another option available – a personal loan! Yes, you can rely on personal finance to cover all your unplanned costs.

Naturally, you might have the question – Can I take personal loan and home loan together? Yes, technically, there’s no upper threshold to the number of loans you can borrow. However, before you apply for a second loan, there are some things you must consider.

#1 Credit Score

Your credit score reflects your consistency in paying back loans. A high enough credit score of 700 or above will put you in a lender’s good books and make acquiring loans easier.

Say you already have a home loan to your name and need a second loan for personal use. In that case, you’ll need a spotless credit report to acquire another loan. The best way to boost your score is to repay your home loan EMIs and credit card bills on time. Doing so can also help you get affordable personal loan interest rates.

Additional Read: Does Prepayment of Personal Loan Affect Your Credit Score?

#2 Debt-to-income ratio

Apart from your credit history, lenders also consider how well you’re handling the home loan EMIs with your current income. If you already have your hands full with a home loan, a lender might not extend you another. Ideally, the amount you spend every month servicing loans must not exceed 50% of your salary. This is because the higher your debt-to-income ratio is, the lesser financial freedom you have. Lenders often review such a scenario negatively.

In such a case, it’s best to demonstrate a stronger repayment capability. To do so, you can apply for a loan jointly with your parents or spouse. With two heads, your chances of acquiring a second loan would improve dramatically.

Additional Read: What is Debt-To-Income (DTI) Ratio & How to Calculate It?

#3 Financial obligations

Even if you have a favourable DTI ratio and credit score, a second loan can be a significant financial burden if you already have a home loan. That’s why you must consider your financial obligations first and whether you’ll be able to achieve them with two loans.

With personal finance, you do get the flexibility to choose your tenure. So, the best thing to do is calculate your projected instalments using a personal loan EMI calculator. This will give you a perspective on how much you’ll save each month after servicing the two loans and plan your second loan accordingly.

To sum up

Having a personal loan and home loan together can indeed help you cover the cost of your home purchase without depleting your savings. However, you must plan your two loans wisely to avoid stressing your finances.

If you’re looking for affordable personal finance to meet additional expenses, Tata Capital can help you out! With our easy-to-meet personal loan eligibility criteria, you can easily get a loan together with your existing home loan. Check out our personal finance offerings here.

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