Home Loan with Personal Loan? Discover Hope (2026)

Struggling with personal loan repayments while dreaming of owning a home? You're not alone. Many Australians find themselves in a similar predicament, wondering if it's possible to secure a home loan when they already have a personal loan. The good news is that it is possible, but it requires careful planning and understanding of your financial situation. Let's delve into how you can make this happen.

Understanding Personal Loans and Home Loans

Personal loans and home loans serve different financial needs, yet they both impact your borrowing capacity. A personal loan is often used for smaller, short-term financial needs such as car purchases or medical expenses and typically has higher interest rates ranging from 6.49% to 12%. In contrast, home loans are usually larger and have lower interest rates, as low as 4% in 2026, given the secured nature of the loan against your property.

When you're already managing a personal loan, lenders will scrutinise your financial health more closely before approving a home loan. Your existing debts, including personal loans, will influence your debt-to-income ratio, a critical factor lenders consider when assessing your home loan application.

Current Market Rates and Loan Requirements

In 2026, the Australian housing market remains competitive, with interest rates for home loans hovering between 4% and 5.5%. When applying for a home loan with an existing personal loan, it's essential to understand how your debts influence your borrowing capacity.

Lenders typically require a minimum deposit of 5% to 20% of the property's value. However, with a personal loan, your deposit requirements might be higher to offset the risk. Additionally, lenders will assess your credit score, with scores above 650 generally considered favourable.

Steps to Secure a Home Loan with a Personal Loan

Securing a home loan while having a personal loan involves a strategic approach:

1. Evaluate Your Financial Health: List all your debts, including the personal loan, and assess your income. Calculate your debt-to-income ratio; ideally, it should be below 36%.
2. Improve Your Credit Score: Pay bills on time, reduce existing debts, and avoid new credit inquiries to boost your credit score.
3. Save for a Larger Deposit: A larger deposit reduces the loan-to-value ratio, making you a less risky prospect for lenders.
4. Consult a Mortgage Broker: With access to 83+ lenders, Esteb and Co can help you find the best loan options tailored to your circumstances.
5. Prepare Documentation: Gather proof of income, personal loan statements, and savings history to support your application.
6. Get Pre-Approval: This gives you a clear idea of your borrowing capacity and strengthens your position when negotiating with sellers.

Expert Tips and Considerations

Here are some expert insights to enhance your chances of securing a home loan:

• Negotiate Your Personal Loan: Consider refinancing or renegotiating your personal loan terms to reduce monthly repayments and improve cash flow.
• Pay Off High-Interest Debts First: Focus on clearing debts with the highest interest rates to improve your financial standing.
• Consider Debt Consolidation: Combining your debts into a single payment can simplify repayments and potentially reduce interest rates.
• Stay Informed on Market Trends: Regularly check interest rate trends and lender offers to time your application advantageously.
• Be Realistic About Your Budget: Ensure your desired property aligns with your financial capabilities to avoid future financial strain.

Frequently Asked Questions

Can I get a home loan if I have a personal loan?
Yes, but it depends on your overall financial health, including income, debt levels, and credit score.

How does my personal loan affect my home loan application?
Your personal loan will be factored into your debt-to-income ratio, impacting your borrowing capacity.

Should I pay off my personal loan before applying for a home loan?
If possible, yes. Reducing your debt improves your debt-to-income ratio, enhancing your loan application.

What credit score do I need for a home loan in Australia?
While scores above 650 are favourable, higher scores increase your chances of securing better interest rates and terms.

How can a mortgage broker help me?
Brokers like Esteb and Co can access 83+ lenders, offering diverse loan options that match your unique situation.

Can I consolidate my debts when applying for a home loan?
Yes, debt consolidation can simplify repayments and may improve your financial profile for a home loan application.

What is the ideal debt-to-income ratio for a home loan?
Lenders prefer a ratio below 36%, as it indicates a manageable level of debt relative to income.