Can I Use a Personal Loan Buy Property?
Yes, you can utilize personal loan to buy a house but rate of interest is comparatively higher than home loan or secured loan. Secured loan ensure lender from any kind of loss of their money.
Personal Loan is fast and easy to get and much documents are not required except last 3 months bank statement, last pay drawn or last year income tax return. Now, most of the banks and money lenders are disbursing personal loan on one's credit score.
Therefore, personal loan is beneficial for paying our current expenses like payment of electricity bill and other current liabilities.
Secondly, the amount of personal loan is lower than value of house so it can't solve purpose of buying a family home.
Personal Loan is useful when sanctioned amount of home loan or secured loan is lower than value of house to be purchased.
You can combine personal loan with sanctioned home loan to manage funds to buy home. Moreover you can buy tiny or mobile home from personal loan.
Generally, tiny home are built in 400 square feet or less so it's cost are very low and can be meet out from personal loan.
Main advantage of buying house from personal loan is that you will not loose your house if you can't repay personal loan whereas disadvantage is that you will not get deduction in income tax.
Personal Loan is an unsecured loan and depends on your credit score, paying capacity and regularity of income.
Generally, it is very difficult to get home loan for tiny or mobile home because they are very small in size and have a very low cost.
Banks or other financial institutes don't like to invest in small homes because tiny home loan are unsecured or if mortgage they have to fulfill it's contingent process.
Their first choice is to finance in regular family home. However, there are some lenders who provide loan for buying tiny or mobile home.
If you want to buy a tiny or mobile home then you can buy it through that route or alternatively personal loan is the best option.
You need not to use the home as collateral for the loan and the seller also like to sale their tiny home to you because they want to avoid mortgage process.
What is the Definition of Personal Loan?
Personal loan also known as consumer loan is a borrowing of money which an individual takes as loan from bank, online lenders, credit unions and other financial institutes to meet out his/her personal needs such as for discharging liability of accumulated electric bill, pay for home renovation, consolidated debts or other such liabilities.
The amount of personal loan can very depending on rate of interest, terms of repayment, fees and other hidden factors. These are term loan and has to repay in equal monthly installments. Personal loan has three common elements like:
- An amount borrowed
- Proof of personal loan (promissory note**)
- Cost at which loan is borrowed (interest rate)
What are the Rules for Personal Loans?
Rules and regulations for sanctioning personal loan varies in different banks, financial institutions, online lenders and others.
While sanctioning personal loan, lenders must keep in mind that entire amount of personal loan is recovered before retirement of borrower and in case any amount is still due it should be recovered from borrower's retirement benefits like leave encashment, gratuity etc. Banks and other financial institutes should schedule or reschedule personal loan in such a way that it doesn't exceed 30 % of borrower monthly salary, income or pension.
It must also be ensured by borrower the correct information regarding rete of interest, the interest must be on annual reducing balance of loan. Some important points which lenders consider for sanctioning personal loan are:
- Personal loan should not be exceeded 20 times of monthly salary, income of borrower
- The period of recovery of whole personal loan should not exceed 48 months
- Monthly deduction of personal loan should not be more than 50% of borrower salary and income
- Lenders can take signed post dated cheques for ensuring recovery of installments. The post dated cheques should not exceed 120 per cent of amount of personal loan
What is the Minimum Salary for Home Loan?
There is no fixed rule for minimum salary required for home loan. It varies from home loan policies of different banks and financial institutions. Before applying home loan it is essential to know the eligibility for required monthly consolidated salary or income required for home loan.
This is one of the most important factors that lenders take into account for sanctioning home loan. This is not the whole factor accessed by lenders but there are other factors too like borrower's employment history, credit score and debt to income ratio (DTI).
For getting home loan borrower should have stable employment with good credit score. The requirement of monthly salary or income is not fixed but it varies in different banks and financial institutions.
However, other requirements for getting home loan are that borrower must submit their income proof, bank(s) statement, payslips, resident proof etc.
Since home loan is a secured loan therefore some banks or financial institutions are very flexible towards these requirements. Borrowers should also compare interest rate and other hidden charges of different banks and other lenders to get maximum amount of home loan with lowest EMI.
How to get maximum amount of home loan on minimum salary?
- Lower down debt to income ratio (DTI) - It means you don't have or have minimum debts as compare to your income at the time of applying for home loan.
- Have a good credit score - the payment of bills and discharging other financial liabilities in time improve our credit score which helps in enhancing our chance of getting approval of home loan.
- Apply with guarantor/co-borrower - if you are unable to meet lenders requirements it is better to apply for home loan with guarantor or co- borrower who have good income and credit score.
- Select a lower amount of home loan - if you will select a lower amount of home loan your chances of approval will increase. After some time (a year or two) if you make payments of your monthly installments without fail you can get top up of existing loan.
Can You Combine a Home Loan and a Personal Loan?
Yes you can combine home loan with personal loan. You can apply for home loan after getting personal loan and vice versa.
You can consume your personal loan for meeting requirement of 20% cash down payment of home loan or for doing renovation and modernization work of your home.
Moreover, home loan and personal loan can also be taken simultaneously if you have sufficient income and good credit score. Again these 4 factors come into picture for enhancing our chance of getting loan. These factors are:
- Regular improvement in debt to income ratio
- Maintain a healthy credit score
- Apply for loan on flexible terms and conditions
- Apply with a co-partner which will increase your capacity to repay
What are the Pros and Cons of Home Loan?
- Appreciation (if not)
- Long-term commitment
Which Country has the Most Affordable Housing?
Affordable house means a house which can buy a home within medium income i.e. the income which is declared by concerned government as income of the middle class.
As a general rule expenses for buying a house should not be more than 30% of gross income of home buyers. Some of the countries which offers most affordable house is as under:
- Canada
- Australia
- China
- Germany
- Indonesia
- India
- Ireland
- Iran
- Philippines
- Mali
- Turkey
- South Korea
- United States
- United Kingdom
- Austria
Can You Buy a House After Debt Consolidation?
To buy an affordable house after debt consolidation is not an easy task. The debt consolidation means total of all the loans and advances weather secured loan or unsecured loan and other advances.
You will be eligible for home loan on calculation of monthly income criteria minus the amount of consolidated debts you already have. So for easy sanctioning of home loan it is better to apply with other persons who have good credit score and income.
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