Need a loan to buy property in India. What are my options?

Question

I have seen a property in India, and I am planning to buy it. The total cost is $105k, out of which I have $30k of my own. The remaining $75k needs to be financed somehow. I can get a loan in India, but I do not want to deal with currency fluctuations since I work in the US. I have spoken to a few banks here, but they only finance property within the US & Virgin Islands.

I have been working here since a year, and draw a salary of $5k monthly after taxes. My credit score is 735(the last time I checked) and I have maintained a credit history since 2.5- 3 years. I also had bought a new car 6 months ago financed at 1.9% for 5 years(Got it quite easily) and have been making payments on it regularly. My total limit on both my credit cards(Never asked for a raise) is a little more than $6k and making payments(Mostly in full) regularly and on time.

I would just like to explore my options here. Should I apply for a personal loan or a line of credit? What are my chances of getting one of these since I don't want to hurt my credit score by being turned down. Or are there any other options?

Any help would be greatly appreciated.

Thanks guys,

Answer 1

Getting the line of credit would likely be a bit easier than the loan but realistically the best option is getting a mortgage through an Indian bank. With a long term mortgage your monthly payments would be a small portion of your income (maybe as low as $500) so currency fluctuations are likely to be minor blips that you can avoid by sending a few thousand to hold as a cushion for when exchange is unfavorable.

Edit: Please be advised that mortgages work differently throughout the world. While 10% down may be standard in the US, in India 40-50% down seems to be the norm.

Answer 2

There are P2P lending sites like prosper.com and lendingclub.com (both have 35K limit) where you can take out a personal loan. Don't expect the rate to be nowhere close to a secured loan like a mortgage or a car loan.

Answer 3

In USA, if you take a personal loan, you will probably get rates between 8-19%. It is better that you take a loan in India, as home loan rates are about 10.25%(10.15% is the lowest offered by SBI). This might not be part of the answer, but it is safer to hold USD than Indian rupees as India is inflating so much that the value of the rupee is always going lower(See 1970 when you could buy 1 dollar for 7 rupees). There might be price fluctuations where the rupee gains against the dollar, but in the long run, I think the dollar has much more value(Just a personal opinion). And since you are taking a home loan, I am assuming it will be somewhere between 10-20 years. So, you would actually save a lot more on the depreciating rupee, than you would pay interest. Yes, if you can get a home loan in USA at around 4%, it would definitely be worth considering, but I doubt they will do that since they would not know the actual value of the property. Coming to answer your question, getting a personal loan for 75k without keeping any security is highly unlikely. What you can do since you have a good credit score, is get a line of credit for 20-25k as a backup, and use that money to pay your EMI only when absolutely required. That way, you build your credit in the United States, and have a backup for around 2 years in India in case you fail to pay up. Moreover, Line of credits charge you interest only on the amount, you use. Cheers!