When you plan to raise a personal loan and worry about its high interest rates, you can follow a simple strategy. You can blend it with another loan to gain a range of benefits, such as low interest rates and easier qualifying.
Let’s understand how it works. Assume you need ₹1 million personal loan for home renovations, then you can use ₹600,000 as a home loan and the remaining ones ₹400,000 as a personal loan. Or, if you have a current loan ₹700,000, need another one now ₹300,000- You can then get a top-up loan on your current loan instead of applying for a new personal loan.
Here we describe the key advantages of bringing multiple loan clubs:
These are the key advantages
1. Reduce interest rates: Home loans are lower, while personal loans are higher (11% to 24%). Some banks allow you to get top-up loans on your home loan, rather than personal loans, which can reduce the overall interest burden.
2. Higher loan qualifications: If your income is not enough to get a large personal loan, you can fuse it with another mortgage loan, such as a home loan, to increase eligibility. Some banks allow co-applicants (spouse/parent) to increase the total approved amount.
3. Easier repayment: Some banks allow loan consolidation, where multiple loans are integrated into one installment, making repayment easier. If you have an existing loan with a good repayment history, the lender may offer better terms for the additional loan.
4. Tax preferential treatment: A personal loan does not offer any tax benefits, but it will provide deductions when you raise a home loan or an education loan.
And, if you use a personal loan to renovate your home, you can claim tax deductions on interest deductions in some cases.
When should you avoid mixed loans?
Compared to current loans, if the interest rate is high (e.g. about 18-20%). And, if you already have a high loan burden, mixing it with another loan can increase financial stress.
If the club can lead to longer repayment terms without real cost savings.
((Note: Raising a loan has its own risks. Therefore, it is recommended that you be cautious)
