If you live in rented house, you might have experienced the pain of moving from one place to another. This is one of the reason when tenants think about buying a house. If you don’t have the funds to buy a house on your own, you can do so by taking a loan from the banks. But to buy a house you have to pay a down payment. The down payments for the house are considerably high due to the high property rates in the country. In some cases, the tenants do have the capacity to pay the loan instalments but are not able to pay the down payment of the house.
Also Read: 4 Smart Ways to Save for Home Loan Down Payment
It might not be possible for some people to manage the down payment with the help of their personal savings. You can apply for a personal loan for a home down payment. In this loan, the bank will provide you the amount needed to pay the down payment of the house.
To provide this loan the banks consider following things before loan approval.
- Credit score: To avail a personal loan the applicant must have a good credit score. The applicant should have a minimum credit score of 750 points. The credit score is the basic factor that the banks refer to approve the loan.
- The value of the property: The bank takes a note of the value of the property for the approval of the loan. If the property has a low value then the loan might not get approved.
- Documents of the property: The documents that are required for the purchase of the property should be shown to the banks for the loan approval. If the banks find that the documents are subjected to risk the loan will get rejected.
But most personal loans are unsecured loans and the sellers may not approve the source for the down payment. Most people think of using their credit card as the personal loan for a house deposit. In some cases, the credit card might be allowed but mostly the credit card payments get rejected because the credit card payments are the unsecured type of loans. Even if the payment is allowed you need to have an effective money management and have no problem making payments of the debts on time.
- The payments of other debts and loans should be included in your debt to income ratios. You must mention the payments needed to be made even if they do not appear on your credit report.
- Your income should be enough to pay for the new loan. Even after paying for all the other debts you need to have sufficient amount with you to pay for the new loan.
- All the expenses should be considered and it should not constitute more than 36 percent of your monthly income.
While applying for a personal loan you need to make sure that all the documents and factors are kept in mind. If the loan gets rejected once from a bank it affects your credit report. If the credit report shows a negative marking, the other banks may not approve the loan as well. If the loan gets rejected you can try other options like NBFC’s and money lenders as they overlook the documentation and credit score for the processing of the loan.
The loan provided by moneylenders and NBFC’s are unsecured loans and are provided without any collateral. Due to the risk involved, they charge a high rate of interest but the rate of interest can lower if you have a good credit score or have a longer tenure for the repayment of the loan.