Using a Personal Loan for Rent Deposit in Expensive Cities

When you're trying to shift homes in a metro city, what looks like a simple relocation often ends up stretching your budget more than expected. That’s because the initial cost doesn’t stop at packers and movers or brokerage. One of the biggest hurdles tenants face is the security deposit. This if often amounting to six to ten months of rent especially in cities like Mumbai, Bengaluru or Delhi. And for someone who’s already managing EMIs or juggling expenses, arranging that amount instantly can be overwhelming.

This is where the idea of taking a personal loan steps in. But can it really work for something like a rental deposit? And is it a smart financial move? Let’s break it down.

In most Indian metros, the security deposit isn’t just a token amount. In Bengaluru, it can go up to 10 months of rent. In contrast, landlords in Chennai or Pune may still ask for a deposit between 3 to 6 months of rent. Suppose your monthly rent is ₹25,000 then you may need to arrange anywhere between ₹75,000 to ₹2.5 lakhs only for the deposit. That too, upfront.

Unlike rent, this is not a recurring cost. It’s a lump sum that sits locked with the landlord until you vacate. If you’re new to the city or switching jobs without enough cash in hand, then it can strain your finances.

Is personal loan a viable option to pay your security deposit?

Lenders allow you to use the funds for a variety of individual needs. So yes, you can use it. It's unsecured which means you don’t need to pledge any asset as collateral. And the best part is that disbursement is quick which can be helpful when you need to lock in a property fast.

But whether you should do it depends on how well you understand the implications particularly around repayment.

What to keep in mind beforehand

If you’ve decided to explore this option then the first thing you’ll probably look at is the personal loan interest rate. This can vary based on your credit history, income and the lender’s policies. Here’s what else you should consider:

Your repayment ability

Just because you’re eligible doesn’t mean it’s affordable. Use a personal loan EMI calculator to estimate how much you’ll need to repay every month. By entering the details, the tool gives you an EMI figure instantly to help you gauge whether it fits comfortably in your monthly budget.

Tenure and total interest outgo

While a longer duration may reduce your EMI, it also increases the overall interest you pay. Ideally, since this is a one-time payment and not a consumption expense, so you should aim to repay it within a shorter duration. That way, you’re not paying interest longer than necessary.

Alternative options

If you already have a credit card with a high enough limit then a balance transfer or a low-interest EMI conversion may also be worth checking. However, these options come with their own set of conditions and should be compared carefully against personal loan terms.

How to ensure you make a smart decision

Check your credit score

A higher score (above 730) usually fetches better loan terms. You can check this through CIBIL or Experian.

Read the terms clearly

To stay away from defaults, make sure to look out for any fees, charges and penalties.

Avoid over borrowing

Only ask what is necessary. There is no benefit in taking more than required simply because it is easily accessible.

A personal loan is a great option to bridge the gap and prevent you from dipping into your emergency savings. It allows you to manage cash flow without disrupting other priorities. Think of it as a stepping stone to solve a short term problem without long term financial stress. What also helps is quick processing. Kotak Mahindra Bank offers instant approval and disbursement once you meet the requirements. This means you don’t have to delay finalising your rental agreement.

In the end, taking a personal loan for a rental deposit should feel like a smart financial decision and not a compromise.

Related Information

Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.

Can you take Personal Loan for Security Deposit in a High-Rent City?

Is personal loan a viable option to pay your security deposit?

What to keep in mind beforehand

How to ensure you make a smart decision