How to use a personal loan to pay for a house

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Buying your dream home is a goal you wish to tick off the list at the earliest. After years of planning and saving up for it, you finally have some wherewithal to start the process. You've even identified your dream house and have started making interior decoration plans. But you are a little confused about how to raise the money for it, and more importantly, how much home loan you can get and whether you will need to pay any money from your own pocket.

This article explains the payment structure and how a personal loan can help in buying the house.

House purchase payment: The breakup of costs

Most first timers labour under the delusion that they can take a home purchase loan and pay for their dream house before moving in. This is the impression that ads for home loans from banks and NBFCs give you. However, the home purchase process often goes like this:

• Pay the booking amount or token amount to the seller - this starts the purchase process and signals the seller to not negotiate or enter talks with other buyers. Meanwhile, the buyer can intimate the home loan lender about the property and find out their loan eligibility.
  
  
• First instalment, usually 25% of the house's value, to be paid so that the seller and buyer may enter into the process of registering the sale agreement. Once registered at the local Collector's office, the buyer pays a stamp duty on the agreement.
  
  
• If applying for a home loan, the buyer submits the registered sale agreement to the home loan lender for scrutiny. After physically verifying the property's condition, its resale market value, the applicant's income and personal details, the lender offers a certain amount of home loan to the applicant. If not applying for a home loan, the buyer pays the remainder of the money to the seller and takes possession of the flat.
  
  
• Once the home loan is approved on the property, it is disbursed to the applicant; stamp duty is paid on the loan agreement as well.
  
  
• Other costs include processing fees, legal and verification fees, transfer fees and membership fees to the society.

Of the above, the booking amount, first instalment, stamp duty on the loan agreement, processing fees, legal and verification fees, transfer fees and membership fees are paid out of your pocket. Once you calculate these costs, they turn out to be a substantial sum of money - but instead of emptying your savings to pay the money, you can apply for a personal loan instead.

Using a personal loan to pay for your dream house

As mentioned above, buying a home entails some upfront costs that must be paid from your own reserves. When you apply for a personal loan on an instant loan app, the money lands in your account in a few hours from applying for it. So you can set the ball rolling at once. Having a loan app that quickly disburses the required funds to your account gives you better control over the negotiations, too. Besides, you can take a lower home loan if you have some money left over from the instant loan.

How to get the quick loan to start the home purchase process

The best instant loan apps are smartphone-enabled and disburse the loan with minimal documentation and less turnaround time than traditional lenders.

Check the section marked ‘Personal loans' and check the product's interest rate, processing fees, documents list, late payment charges, eligibility criteria, etc.

• After you check your eligibility, you can apply for the instant loan on the app. You will need to self-attest your document copies to be picked up from your residence to submit to the lender.
• Meanwhile, the app checks your credit score and documents. Once all documents are found correct, the loan application is approved and the money is disbursed in a few hours. However, this is subject to the application being made correctly, your credit score checking out, etc.
• Withdraw the disbursed money and use it to pay the various expenses related to the house purchase.
• As with other loans, the personal loan is repaid to the app in monthly instalments.