A home loan is essentially one of the best options for securing your dream place of residence. It enhances an individual’s sense of security and reliability while strengthening his family’s reliance on him. However, it is often not possible to fund an entire property depending on one’s savings only. A home loan is often a saviour for such cases that technically constitute most of the population in the current time. Today, several banks, as well as non-banking financial corporations, provide housing loans that are formulated with differential schemes and benefits. This is done to facilitate people from all sections of society to avail home loans conveniently.
Coming to the main part, the CIBIL score plays an important role in getting a loan application approved. Housing or home loans, for instance, require a CIBIL score of 700 and up. Not having this requirement is a major deciding factor for your loan application to be rejected. Thus, listed below are some pointers that you must consider if your CIBIL score is below the required value and you are going to apply for a housing loan, soon.
Improving the CIBIL Score
This is one of the most basic things you can maintain to make yourself eligible before you apply for house loan. CIBIL score is a credit score that lenders tend to rely on before approving an application. The credit score is attached to your name based on different behaviours that you have exhibited as a borrower previously. The CIBIL score is thus, an important aspect.
To improve this, you can start with clearing all of your outstanding debts and checking your credit reports for possible errors. Some other methods for improving the CIBIL score include optimising the credit utilisation rates and regularising your payments by opting for EMI transactions.
The Gap Between Consecutive Loans
Applying for big loans consecutively affect your credit score harshly. Reversing the credit score reports is essentially a lengthy job that can take up to months. Thus, it is always a better option to apply for a new loan post a significantly stagnant period after the previous loan. Lenders, for instance, can assume this behaviour of the borrower as a hungry, non-complying one. Consecutive loans may result in hard entries on your credit report. This can even lead the next lender to conduct an enquiry session and analyse your past credit behaviour before allowing through the application. The best stagnant period is a duration of a minimum of six months between two consecutive loans.
Having a co-applicant
The saying “two is better than one” is essentially applicable in the case of a home loan. Housing loans can often become a financial burden for the borrower, especially now that the prices of raw materials have gone up. Hence, it is always a good idea to have a co-applicant for such loans. The co-applicant can be someone from a family with a stable income and, of course, a good credit score. Having a co-applicant with these features will enhance the chances of approval for your loan application. Thus, the financial burden becomes half of what it could have been in the case of a single borrower.
Opt for the previous or existing lender
Human relationships are the best options when analytics and techniques fail. Thus, if you are a loan applicant with a low CIBIL score report, you can perhaps approach your existing lender. It can also be the one with whom you seemingly have a good professional relationship. The CIBIL score decides your credibility as a borrower. However, if you are approaching a lender who knows you and your credit behaviour, it will be easier for you to convince him for approval.
Higher down payments
Generally, a borrower with all his documents and a good CIBIL score in place has to pay 20 per cent of the property’s rate as a down payment to the lender. However, this is only applicable if the credit score in question is equal to or greater than 700. In case it is otherwise, paying a higher amount as the down payment is one of the alternatives for securing a home loan application. Thus, if you are someone with a decent income and have employment proof with a government registered organisation, opting for this alternative can be a solution. However, this is only if the lender has no issue with such a deal.
These are some of the methods by which you can proceed to apply for a home loan, even with a low CIBIL score. Also, as CIBIL score is one of the main factors for long term loans like this, try to maintain it as much as possible. It will bring you good investors in the near future.
