What is a Home Loan?
A home loan is a loan given by a bank, mortgage company or financial institution. The loan is advanced to a person to assist in buying a primary or investment residence?. Home Loans allow more people a chance to own real estate as it allows aspiring homeowners to pay the capital required for the purchase of the new estate with the assistance of Banking Corporations.
This loan is always given to the property/real estate and the corporation. A predetermined rate of interest is to be paid at the end of every month by the borrower. Should the borrower fail to repay the money, the property will be ceased by the bank.
What is a Personal Loan?
A personal loan, also known as an Unsecured Loan or Signature Loan, is a loan sanctioned to a person based on their credit history and ability to repay said loan solely through personal income. There is no security attached to the loan.
A personal loan may be taken for a variety of reasons such as medical, vacation, household extensions, repairs, purchases, education, etc.However, a personal loan cannot be used for business or commercial purposes. Repayment is usually made through fixed amount instalments set to be paid over a pre-decided term.
Documents Required for a Personal Loan
When one applies for aloan, whether personal, home, education or any other, the lending authority runs a thorough background check to determine one’s repayment capacity. Thisis usually done by looking at the following factors:
- Credit Score (CIBIL Score)
- Current Income (Salary + Others)
- Employment History
- Probable Equated Monthly Instalment
- Payment History of Credit Cards and other loans
- Payment History of Rents and other utilities
- Account History of Bank Accounts including especially bounced cheques
- Present Outstanding Debts
All lenders wish to give out low-risk loans,and that is why the lenders will scrutinize all your documents and look into your credit history. Each loan will eat up into the monthly income of any person,and the lenders keep this in mind before determining the amount to give out as a loan, the monthly instalment on loan and the tenure of the loan.
Home Loan or Personal Loan?
In Indiaauto loans, education loans and Home loans are the most popular kind of loans. Most people already have at least one of these loans availed and are paying them off, piece by piece. However, one may still need to raise credit for a separate purpose at a different instance and will use a Personal Loan for the same.
One particular question that arises is that “can a person avail a Personal Loan after having already availed a Home Loan?”Thiscompletely depends on the person’s ability and capacity to bear both loans simultaneously. There is no cap or limitation on the number and types of loans a person can take at the same time as long as the person is able to handle said loans effectively.
The most basic test that a lender will conduct is an EMI to income ratio. Lenders tend to not sanction a loan if the EMI is more than 50% of a person’s Monthly Income. However, most financial analysts advise that the Monthly Debt Repayments should always be limited to 40% from a borrower’s perspective.
One’s credit score and debt-to-income ratio are one of the most basic and essential parameters used to determine whether or not a secondary loan will be issued to a person or not. For example, if the monthly income of a person is Rs. 1,00,000/-, Banks will lend to the person amounts such that EMI shall reach Rs. 50,000/- which is 50% of the Monthly Income. So, if a person has a Home Loanfor which they pay Rs. 50.000/- per month already, in all probability, they will not get another loan, personal or not. However, if their Home Loan EMI stands at Rs. 40,000/-, they will get another loan with EMI up to Rs. 10,000/- should they fulfil other requirements.
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