At a Glance

Oftentimes, people wonder if their current outstanding debt will impact other debt that they are applying for. Two of the most common forms of debt are personal loans and mortgage loans. Many borrowers often think about factors such as do personal loans affect mortgage applications or can I get a mortgage if I have a loan, which can be confusing topics.

Fortunately, we will cover the basics of both personal loans and mortgage loans, along with whether or not these two debt types impact one another.

In this article, you’ll learn:

What is a personal loan?

For those unfamiliar with the term, a personal loan is a short-to-long term loan that offers a sum of money for any purpose. The sum is typically in the amount of $1,000-$100,000 and has an interest rate ranging from 6%-36%. Total repayment of the loan is usually due within 2-7 years, on average, and there is no collateral associated with a personal loan, making it an unsecured form of debt.

Learn more: What is a Personal Loan?

What is a mortgage?

On the other hand, a mortgage is a specialty loan type that is to be used for the purpose of buying a home. Given this purpose, a mortgage typically has a higher borrowing amount going into the hundreds of thousands or millions, and has an average interest rate that varies over time. Currently, rates are hovering between 6-7% on average. A mortgage, given the larger sum of borrowing funds, will have a tenor of 15-30 years in most cases.

How personal loans affect your mortgage application?

If you currently have an outstanding personal loan, or are considering taking one out, while thinking about applying for a mortgage, there are a couple ways in which it can affect your application:

1. Credit score

When you apply for a loan, your credit score takes a small hit of a couple points due to the hard check on your credit that the lender performs. If you are on the border of an acceptable mortgage credit score, taking out a personal loan can drop you beneath that level for a couple of months.

2. Payment history

If you make consistent payments on your personal loan over time, your credit score will increase slowly. However, if you fail to make payments, one of the answers to do personal loans affect getting a mortgage is that your payment history will be tarnished. This may signal to lenders that you cannot take on the debt of a mortgage.

Learn more: What is Payment History?

3. Debt-to-income ratio

Finally, the amount of debt you have outstanding compared to the income you bring in is known as a debt-to-income ratio. Lenders want to see that you have far more income than debt outstanding on a monthly basis. If you have a large personal loan that you aren’t making large payments on, this ratio will not be where lenders want it at to approve you for a mortgage.

Can a personal loan help you get a mortgage?

When looking at can a personal loan affect a mortgage, it’s easy to look at the negatives. In reality, getting a mortgage with a loan outstanding already is possible and can actually help to a degree. If the loan amount outstanding is not extremely large and you have never missed a payment on the loan, it can actually signal to a lender that you are responsible with your debt. To that end, focus on making all payments on your outstanding loans on time and in full.

How to increase your chances of mortgage approval?

For those wondering will a personal loan affect my mortgage application or does having a personal loan affect getting a mortgage, the answer is that yes it does. Learning how to increase your chances of getting approved for a mortgage is the best bet. To that end, use the following tips:

  • Make all existing debt payments on time and in full
  • If possible, pay off existing debt completely before applying for a mortgage
  • Take time to raise your credit score far above the recommended threshold if you have other debt
  • Don’t apply for a larger mortgage loan if you have a poor debt-to-income ratio


Personal loan interest rates vary between 6%-36% on average whereas mortgages have an average current interest rate of 6%-7%. Taking this into account, personal loans do not tend to have lower interest rates than mortgages.

Theoretically you could apply for a personal loan immediately after being approved for a mortgage. However, when looking at does having a personal loan affect getting a mortgage, it goes the other way too. You may not be approved for a personal loan if you just got your mortgage and barely have any history with the debt.

A credit score will almost always drop just after applying for a loan of any kind due to the hard credit check lenders perform. In looking at will a personal loan affect getting a mortgage, this plays a role. If you recently got a personal loan, your credit score will be a few points lower after the check which may have dropped you beneath the cut-off point for the credit score required for a mortgage.