When it comes to purchasing a car, a home, etc. a down payment is one significant challenge that most buyers face. Shelling out that 20-30% of the total amount upfront needs strategic financial planning beforehand. However, if you don’t wish to arrange the same from your pocket, availing a personal loan for a down payment can be a favourable option.
Personal loans come with unrestricted end-usage and no collateral requirement. Therefore, you can utilise the credits for financing various requisites including the down payment. However, before applying for one, there are certain things you need to consider.
5 things to consider before using personal loans as down payment
1. Interests on the loan amount
Remember, you need to pay interests on this unsecured loan, which can be higher with a longer tenor. So, it is best to approach a lending institution which offers low interest rates on personal loans. Consider this factor to evaluate your repayment capability precisely so that it doesn’t become a financial burden for you.
However, note that the ‘lowest’ is not always the best deal. You can compare personal loan rates offered by various financial companies in India to settle with the perfect offer.
2. Eligibility criteria to avail the credit
Like for any other purposes, personal loans can be used down payment, also require an applicant to fulfil certain eligibility criteria. Nowadays, financial institutions ask for minimal qualifications including –
- A residing Indian citizen.
- Age within 23 to 55 years.
- A salaried employee at any private or public company, or an MNC.
Make sure to meet the personal loan eligibility criteria of the concerned lender to avoid chances of your application’s rejection. Use an online eligibility calculator to evaluate whether or not you are qualified for this unsecured loan.
3. Your CIBIL/ credit score
While unsecured loans are profitable for borrowers, these are quite riskier for lenders, considering their collateral-free nature. This is where a good CIBIL score provides the much-needed assurance and assessment of your creditworthiness.
This 3-digit number starting from 300 to 900 plays a significant role in accepting or rejecting your loan application. It reflects your financial behaviour, your existing debts, credit default history, etc. Having a CIBIL score of at least 750 makes you eligible and ensures the application is processed successfully without any hassle.
So, as you are planning to avail an unsecured loan, do check your credit score first.
4. Loan repayment tenor and your capability
Prominent lending institutions in India offer a flexible repayment tenor starting from 12 months up to 60 months. Select your tenor according to your convenience. Additionally, make sure to evaluate your loan repayment capability based on your liabilities per month before availing one.
5. Personal loan for your home loan
If it’s a home loan down payment, then remember that you need to pay 2 EMIs simultaneously. So, assess yourself and prepare to manage your finances effectively before the repayment process begins. Missing out on the EMIs can negatively affect your credit history, often attracting penalties.
Technology has zeroed in the gaps between lenders and borrowers; the former can now approve a loan in minutes when you opt for personal loan online application. Leading NBFCs like Bajaj Finserv also make it more convenient for their customers with their pre-approved offers.
Existing customers of the NBFC can avail pre-approved offers which not only simplify the whole procedure of availing finance but also save considerable time. Besides personal loans, these schemes are applicable to business loans, home loans and a plethora of other financial products.