With the increasing inflation in the economy and soaring prices of commodities prevalent in present times, it has become exceedingly difficult to save any money. Although having grown up with the elders constantly stressing on the importance of saving money, it becomes difficult to do so in the present scenario. Loans, in general, have become a solution that can be availed to manage monetary shortfalls.
Home loans, vehicle loans and personal loans are the most popular loans usually availed by salaried individuals and households. Home and vehicle loans are considered as secured loans as these loans are secured by the asset. This means that if a borrower defaults in repaying the loan amount, the house or vehicle can be seized, and the amount recovered from it gets settled against the outstanding loan balance. In contrast, personal loans are unsecured loans that are not secured by any kind of assets. They, therefore, fall under the high-risk category and so entail a higher interest rate when compared to secured loans.
Is a personal loan advisable when having a home loan? Well, that actually depends on a number of factors.
Will you be able to manage the monthly repayments for each? If you can manage the EMIs for both the loans and also manage your monthly family budget, then there is no harm in taking a personal loan while already having a secured loan. In Fact, it is also considered good to have a mixture of secured and unsecured loans as far as your CIBIL score is concerned. It is considered as a prudent choice to have both secured and unsecured loans and it reflects as wise investment decisions.
Your income to debt ratio is another major factor that the bank considers if you apply for a personal loan. A borrower opting for a personal loan is expected to repay the same from the monthly salary, so an income to debt ratio of 30 % is considered ideal. However, many Fintechs do consider a ratio of 50% as well. It is therefore advised to consider all the factors before applying for the loan.
Consider the eligibility criteria for a personal loan before putting your application in. Most financial institutions look at salaried individuals with a minimum take home salary of Rs 25,000/-, but there are a few Fintechs like Qbera that also consider a minimum salary of Rs 18,000 as well. The preferred age group for these loans is generally between 23-55 years. The CIBIL score plays a very crucial role and a score of 750 and above is mandatory for a loan from banks. Fintechs are a bit lenient and so, they consider scores of 600 and more – but they insist on there being no payment defaults in the past 24 months.
So, if there is a requirement to do a renovation of the house or you intend to upgrade your appliances, you can consider taking a personal loan even when you already have a home loan or a vehicle loan.