Can I use a personal loan as a deposit for an Australian home loan?

Generally, no — not in the way most buyers picture it. Most lenders don’t treat funds from a personal loan as a genuine deposit the same way they’d treat money you’ve saved yourself, and taking one out can work against a home loan application in two separate ways at once: the borrowed funds usually fail a lender’s genuine savings test, and the loan’s own repayments then get counted as an existing debt commitment when the lender works out how much you can borrow. Policies differ between lenders, so the detail is always worth confirming directly — but the two mechanisms below are why a personal loan deposit is rarely the shortcut it looks like.

Effect	What it means
Genuine savings test	Borrowed funds usually aren’t accepted as savings
Serviceability assessment	Loan repayments count as an existing debt

Two terms are doing the work in that answer. Genuine savings describes deposit funds a lender can see were built up through your own saving pattern over time, rather than appearing as a lump sum with no history behind it — it’s a lending-policy concept, not something set by ASIC or APRA. Serviceability is the separate question of whether you can afford a loan’s repayments once it’s approved, which lenders are required to assess under responsible lending law, taking your income, expenses and existing debts into account. A personal loan touches both of these, which is why it can count against an application twice.

Why a personal loan usually doesn’t count as genuine savings

There’s no government standard defining genuine savings, and no single rule for how long funds need to sit in an account before a lender treats them that way. Industry practice, as published on individual lenders’ own policy pages, points to a holding period of around three months for funds like a cash gift — as at July 2026, Pepper Money’s published guidance describes gifted funds held roughly three months as sometimes accepted, and Westpac’s broker policy documents three months of continuous rental history as an alternative pathway. That timeframe exists to demonstrate a pattern: money that’s simply sat in an account for a while, on its own, still doesn’t show that you built it up through your own saving.

A personal loan doesn’t fit that pattern at all, no matter how long the funds sit in your account before you apply. The money didn’t come from your own income or spending discipline — it came from a lender, and it’s a debt you’re obliged to repay. That’s the reason it’s generally not treated as genuine savings: the concept is about demonstrating your own capacity to save and sustain repayments, and borrowed funds are, by definition, the opposite of that.

As with every genuine savings policy, the exact treatment is set individually by each lender, so this is always worth confirming with the lender or a broker you’re dealing with. Our guide to what counts as genuine savings with Australian lenders covers the categories lenders commonly weigh in more depth.

There’s a knock-on effect worth flagging too. If a lender doesn’t count personal-loan funds as part of your deposit at all, the amount you’re effectively borrowing against the property is higher than it looks on paper — and that matters most around the 80% loan-to-value ratio (LVR, the loan amount as a percentage of the property’s lender-assessed value) mark. Lenders mortgage insurance (LMI) is usually payable once the amount borrowed exceeds 80% of the property’s value, protecting the lender rather than the borrower or a guarantor. A deposit that looks like 20% on the surface, but is partly funded by a loan a lender won’t recognise as savings, can end up assessed very differently once that’s factored in.

How a personal loan reduces how much you can borrow

Separate from the genuine savings question, a personal loan repayment is a debt commitment — and lenders are required to factor your existing debt commitments into how much they’ll lend you for a home loan, on top of the new commitment they’re assessing. Under ASIC’s Regulatory Guide 209 on responsible lending (current as at July 2026), a credit licensee must make reasonable inquiries about your financial situation, take reasonable steps to verify it, and assess whether you can meet your repayments without substantial hardship. A personal loan repayment is part of that financial situation, alongside whatever the new home loan would cost you.

There’s a prudential layer on top of that conduct obligation. APRA’s Prudential Practice Guide APG 223 sets out an interest-rate buffer that authorised deposit-taking institutions are expected to apply:

Under Attachment C of Prudential Standard APS 220 Credit Risk Management, ADI’s must apply a buffer over a loan’s interest rate of at least 3.0 per cent, unless determined otherwise by APRA. (sic “ADI’s” — verbatim from APG 223)

That buffer applies to new and existing debt commitments — meaning a personal loan you’re still repaying is assessed with the same margin for higher interest rates as the home loan itself. APG 223 is a practice guide rather than a binding rule in its own right (the 3.0% buffer sits in the enforceable prudential standard, APS 220, which APG 223 relays), sitting alongside the conduct-level obligation in RG 209. Together, they’re why a second loan repayment is counted against you in a borrowing capacity assessment, not just against your ability to demonstrate savings.

Exactly how much difference this makes to any individual application isn’t something a general article can put a number on — it depends on your income, your other expenses, the lender’s own assessment method, and the loan itself. What the framework confirms is the mechanism: the repayment is counted, and it’s counted with a buffer, whether the debt is new or already existed before you applied.

Why full disclosure matters

Because a personal loan repayment is one of the existing debt commitments a lender is required to factor in, giving your lender or broker complete and accurate information about it — the balance, the term, the repayment amount — is part of what makes a responsible lending assessment work as intended. RG 209 requires a lender to make reasonable inquiries and take reasonable verification steps, and an application that leaves out an existing loan isn’t assessed on complete information — the responsible lending framework depends on what the lender is told matching the borrower’s actual position, whatever the amount involved.

What are the alternatives to a personal loan for a deposit?

Buyers who don’t yet have a savings history to show often weigh up a few different paths instead, and none of them carries a second debt repayment into the borrowing-capacity assessment the way a personal loan does:

• Building your own savings history over time. The most direct way to establish the pattern a genuine savings policy is looking for, though it takes time.
• Gifted funds from family. Generally subject to the same kind of holding-period expectations covered above — worth confirming with the specific lender.
• A family guarantor. Where an immediate family member offers equity in their own property as additional security, this can reduce how much the lender relies on your own deposit position — though the guarantor’s asset is genuinely at risk, and it’s a separate decision with its own trade-offs.

Which of these — or some combination — fits your situation depends on your income, your timeline, your family circumstances, and how much deposit you’re ultimately aiming for — our guide to how much deposit you need to buy a first home covers that separately. A licensed mortgage broker can compare how different lenders would actually treat your position.

How do you decide what’s right for your situation?

That isn’t a question this article can answer for you. A personal loan deposit isn’t ruled out everywhere — policies vary by lender, and the only reliable way to know how yours would be treated is to ask. What’s clear from the two mechanisms above is that it’s rarely a simple substitute for savings: it’s assessed against the genuine savings question and the serviceability question separately, and a licensed mortgage broker or your own lender is best placed to work through both for your circumstances.