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Can I take out a personal loan after getting a home loan?

Peter Terlato avatar
Peter Terlato
- 4 min read
Can I take out a personal loan after getting a home loan?

After successfully securing a home loan and purchasing a property, it’s not uncommon for mortgage holders to be strapped for cash. You might consider taking out a personal loan to help pay for renovations costs, buy new furniture, or simply to cover necessary everyday expenses.

However, you may be wondering if it’s possible to take out a personal loan after getting a home loan.

What to consider if you want a personal loan on top of your home loan

Generally, It is possible to take out a personal loan after obtaining a home loan in Australia. However, there are a few important factors you may want to consider before applying for additional finance. We’ve listed some of these below:

  • Lender Policies: Different lenders have varying policies regarding taking on additional loans after obtaining a home loan. Some lenders may be more flexible and allow you to take out a personal loan, while others may have stricter guidelines. It's important to check with your specific home loan lender to understand their requirements and any potential limitations.
  • Purpose of the loan: When you apply for a personal loan, lenders often ask for the purpose of the loan. They may consider the intended use of the funds and evaluate whether it aligns with their lending criteria. Common purposes for personal loans include debt consolidation, home improvements, education expenses, or other personal needs. Be prepared to explain your reasons for taking out the loan and how it fits into your financial plans.
  • Debt-to-Income Ratio: Lenders assess your ability to manage debt by evaluating your debt-to-income ratio. This compares your monthly debt payments (including your home loan) to your monthly income. Adding a personal loan will increase your debt obligations, potentially affecting your overall financial health. Lenders typically prefer a lower debt-to-income ratio, so it's important to calculate how the additional loan will impact this ratio and if you still meet the lender's criteria.
  • Creditworthiness: Your credit history and credit score play a significant role in loan approvals. Taking on more debt with a personal loan could affect your creditworthiness. If your credit score decreases or your credit report shows a higher level of debt, it may impact your ability to secure favourable terms or interest rates for future loans.
  • Repayment Capacity: Evaluate your budget and assess whether you can comfortably manage the additional loan repayments. Consider the interest rates, fees, and repayment terms associated with the personal loan. Ensure that you have sufficient income to cover all your existing financial obligations, including the new personal loan.
  • Financial Advice: Seeking advice from a financial advisor or mortgage broker can provide personalised guidance based on your specific circumstances; help you assess the potential risks and benefits of taking on a personal loan after a home loan; and guide you through the application process.

What are the eligibility requirements?

Provided you’re able to meet the general eligibility criteria for both a new personal loan and your existing home loan, your application should be approved. Those eligibility criteria may include:

Obtaining a personal loan during or after a home loan may impact your ability to service your total repayments, as debt levels can skyrocket. Every loan you take out increases the amount you need to pay for in monthly instalments.

As long as you can show sufficient income to repay both loans on time, you should be able to get a personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favourable terms for your home loan.

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Product database updated 17 Apr, 2024

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.