Personal Loans For Home Purchases?
Sarah Dinkins
March 20, 2008
It may sound impressive but with the help of some friends and family you can purchase a home with personal loans if you donīt qualify for home loans due to lack of provable income. It is of course more expensive since the interest rates on home loans are generally lower but if you canīt resort to home loans it is definitely an option to consider.
Provable income is a must to qualify for a mortgage loan as well as good credit. You may meet the rest of the loan requirements but if you canīt probe that you have the necessary income to afford the monthly payments, chances are you wonīt be able to get approved for a mortgage loan.
Pool Of Personal Loans
With several personal loans of $5000 to $10000, you could easily raise the money needed to purchase a home. Many banks offer pre-approved personal loans for that amounts without having to meet additional requirements than those you needed to open the bank account.
With the aid of some friends and/or family you can obtain a pool of personal loans and get the money to purchase a home. This method requires that you have an excellent income though you may not be able to prove it. This is due to the fact that personal loans carry higher interest rates than home loans and thus the overall monthly payment of the combined loans will be significantly higher.
Easing Requirements And Reducing The Advantages
The main advantage of this method is that the requirements for approval are eased. You no longer will have to prove a steady income (two years in the same job) nor will you have to show an impeccable credit history in order to get approved. Most of these loans are already pre-approved by banks and lenders so they are really easy to get.
However, the interest rate youīll have to pay will be significantly higher. The interest rate of personal loans can double the rate of secured loans like home loans (12% APR instead of 6% APR) which can turn the pool of loans more onerous. Also, the repayment program of personal loans is generally shorter than that of home loans. Thus, chances are you wonīt get longer repayment programs than 10 years and therefore, the monthly installments combined will be high too.
And above all, your friends or family are risking ruining their credit if you canīt repay the loans on time. They must be ready to afford the monthly payments on their own if they want to make sure their credit score will remain untouched. Otherwise, a late payment, missed payment or default will ruin their credit history.
The Advantages
However, your home purchase wonīt be at risk of repossession. Since the property wasnīt used as collateral the lenders canīt claim it in order to recover their money. Besides, you can always take a home loan later when you can show provable income and repay the previous loans obtaining longer repayment programs, lower rates and thus, smaller monthly payments. Itīs just like refinancing an outstanding home loan.
Provable income is a must to qualify for a mortgage loan as well as good credit. You may meet the rest of the loan requirements but if you canīt probe that you have the necessary income to afford the monthly payments, chances are you wonīt be able to get approved for a mortgage loan.
Pool Of Personal Loans
With several personal loans of $5000 to $10000, you could easily raise the money needed to purchase a home. Many banks offer pre-approved personal loans for that amounts without having to meet additional requirements than those you needed to open the bank account.
With the aid of some friends and/or family you can obtain a pool of personal loans and get the money to purchase a home. This method requires that you have an excellent income though you may not be able to prove it. This is due to the fact that personal loans carry higher interest rates than home loans and thus the overall monthly payment of the combined loans will be significantly higher.
Easing Requirements And Reducing The Advantages
The main advantage of this method is that the requirements for approval are eased. You no longer will have to prove a steady income (two years in the same job) nor will you have to show an impeccable credit history in order to get approved. Most of these loans are already pre-approved by banks and lenders so they are really easy to get.
However, the interest rate youīll have to pay will be significantly higher. The interest rate of personal loans can double the rate of secured loans like home loans (12% APR instead of 6% APR) which can turn the pool of loans more onerous. Also, the repayment program of personal loans is generally shorter than that of home loans. Thus, chances are you wonīt get longer repayment programs than 10 years and therefore, the monthly installments combined will be high too.
And above all, your friends or family are risking ruining their credit if you canīt repay the loans on time. They must be ready to afford the monthly payments on their own if they want to make sure their credit score will remain untouched. Otherwise, a late payment, missed payment or default will ruin their credit history.
The Advantages
However, your home purchase wonīt be at risk of repossession. Since the property wasnīt used as collateral the lenders canīt claim it in order to recover their money. Besides, you can always take a home loan later when you can show provable income and repay the previous loans obtaining longer repayment programs, lower rates and thus, smaller monthly payments. Itīs just like refinancing an outstanding home loan.
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