Can I use a personal loan in lieu of deposit?

Any general questions you might have in regards to loans and finance.
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Otto Dargan
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Re: Can I use a personal loan in lieu of deposit?

Post by Otto Dargan »

Hello Super Franky. Welcome to the forums.

Some lenders may accept a personal loan as a deposit but most lenders will not due to genuine savings requirements.

Note that you will need to meet the criteria for both a home loan and for a personal loan so, essentially, you must have:
  • A high income to afford both repayments.
  • Little existing debt (car loans, high credit card balances, etc).
  • A clear credit history.
  • Some savings to make up any shortfall.
  • A proven rental history (preferred).
The primary reason for this is that when we submit your home loan application, they will take your personal loan repayments into account when they calculate your borrowing power.

Guarantor loans can be an option for you, with which you can borrow up to 105% of the purchase price. You can also read our page on buying a home with no deposit.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Can I use a personal loan in lieu of deposit?

Post by Otto Dargan »

Hi Super Franky,

You can take out a personal loan and later consolidate your debts. This will help you make affordable repayments and manage your debt effectively.

Let's say you take out a $40,000 personal loan with a term of 5 years at an interest rate of 14%. This means you'll have to pay around $15,843 in interest over the 5 year loan term. However, you can later refinance your home loan and consolidate your personal loan as well as any other debts into a single payment payable at your home loan interest rate.

This way, even if you refinance two years later, you can still save around $4,123 by consolidating your 14% personal loan into, say, your 5% home loan! It can definitely help you manage your debts and save while you are at it.

In some cases, we can get your home loan approved with a major lender but it is likely that we may need to use a specialist lender at a slightly higher interest rate. It all depends on the overall strength of your financial position.

Also note that you may be eligible for waived LMI. However, you will need to have a clean credit history and should not be borrowing more than 85% of the property price.

You can know more about this by checking out our website. We can also be reached on 1300 889 743 or you can fill in our free assessment form.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

User avatar
Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Can I use a personal loan in lieu of deposit?

Post by Otto Dargan »

Hi Lei,

Although it might be tough to save money and may take some time, it is recommended that you save a deposit of your own in order to take out a mortgage.

Here are some tips to help you qualify for a mortgage:
  • Have a look at our Prepare To Buy program to help you prepare to qualify for a mortgage.
  • Make regular contributions for a 5% deposit or find creative ways to save.
  • Lenders like to see that you have a stable job, so it it is recommended that you do not change jobs before applying for a loan.
  • You need to make your bill payments on time every time in order to have a strong credit history.
To know more about no deposit home loans, please check out our website. We can also be reached on 1300 889 743.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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