Unplanned expenses and going over budget while building a home is not uncommon. Spending 20%-30% over the planned budget is normal as the construction progresses and last-minute modification, changes, redesigns and additions are implemented. After all it’s your home and you want it to look the best.
Invariably, when you exceed your home loan budget, it will impact your savings and other essential expenses as well. Rather than digging into your fixed deposits or savings or relying on private moneylenders and falling prey to loan sharks, or worst, using multiple credit cards to meet your expenses, your lender may allow you to take a personal loan if you meet some eligibility criteria.
Many banks and NBFCs also allow you to take a home loan after you have taken a personal loan. However, your debt to income ratio shouldn’t be more than 50%. Which means, you must not be using more than 50% of your income on repaying your debt.
Things to consider before you take a home loan and personal loan together
1. Bigger EMIs and increased debt burden
Interest rates for personal loans are significantly higher than for home loans. When you take a personal loan over a home loan, you need to brace up for paying two EMIs with relatively higher interest rates for the personal loan. If you take a home loan after taking a personal loan, though you’ll be paying lower interest rates, still your EMI outflow and your debt burden will increase.
A better alternative to taking a personal loan after a home loan is to take a home loan top up to meet your expenses. The interest rates are significantly lower and while personal loan are only available for up to 5 years, you can take a home loan top up for the remaining duration of the home loan. For example, if you took a home loan with tenure of 20 years and decide to take a top up after 3 years, you can extend the tenure of the home loan top up for another 17 years.
2. Good credit history & debt to income ratio
Lenders are strict about credit scores, credit history, and the borrower’s debt to income ratio before approving two loans to the same borrower. You must maintain a good credit history with timely payments and your debt to income ratio shouldn’t be more than 50%.
Remember that if you are going for a personal loan, which is an unsecured loan, lenders will be more particular about the above parameters.
You can easily calculate your debt to income ratio by using this simple formula below.
DEBT TO INCOME RATIO = TOTAL EMI/NET MONTHLY * 100
3. Helps in Improving Your Credit Score
Ironically, a criterion for eligibility is also one of the benefits of taking a home loan and personal loan together. If you have a balanced mix of secured and unsecured loans, banks think that you have a healthy mix of credit. This, in turn, helps to improve your credit score.
4. Making an informed decision
Keep in mind that increasing your debt burden without a repayment plan and emergency funds in place is an imprudent decision. Carefully weigh out the pros and cons before you decide to take an additional loan.
The below chart shows how your monthly EMI outflow shouldn’t be more than the prescribed percentage of your income.
Not more than
40% of net monthly income
Not more than
15% of net monthly income
Not more than
10% of net monthly income
Finserv MARKETS’ loan eligibility calculator and EMI calculator for Bajaj Finserv personal loan and home loan are good places to start with to understand how much you may have to pay every month and whether you can handle an added debt burden with your present income.
You can also consider applying for a top-up loan offered by Bajaj Finserv available on Finserv MARKETS. A top-up loan comes with a lower rate of interest and a longer tenor. It can be utilized as a personal loan, giving you flexibility on how you spend those funds.
With Finserv MARKETS, applying for a Personal Loan and a Home Loan is easy, quick and completely hassle-free. What’s more? The entire process is online and can be processed right from the comfort of your home. So why wait? Avail a personal loan with us today and solve all your financial worries.
Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus, when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!