Your application for a home loan being approved surely brings you one step closer to realising your goal of owning a home, which is a dream many people have. The majority of lenders consider your credit score to be one of the most important characteristics when making their decision. Having a low credit score can diminish your approval chances, but it does not automatically mean that your aspiration of purchasing a property with the assistance of a home loan would become impossible.
In spite of having a poor credit score that falls on the lower side of the cibil score range, it is still possible for you to obtain a home loan by following these four smart tips:
Add either a guarantor or co-applicant
When financial institutions have doubts about an applicant’s ability to repay a loan, they frequently stipulate that a co-applicant or guarantor be included in the application process. If you have a low credit score, it could hurt your chances of getting approved for a home loan. However, if you add a co-applicant or guarantor to your application who has a steady income and a good credit score which is on the higher side of the cibil score range, it could increase your eligibility for a loan, and, therefore, your chances of getting approved for a loan as well.
You can check your and the proposed co applicant/guarantor’s credit score by going for cibil score check online by pan card free.
Remember that the safety net provided by the lender is increased when a co-applicant or guarantor is brought on board. This is because the added co-applicant or guarantor would be held equally responsible for the loan repayment. However, keep in mind that not only would any type of delay or default in loan repayment on your side hurt your credit score, but it also has the potential to adversely affect the credit ratings of your co-applicant and guarantor as well.
Make contact with several additional financial institutions such as HFCs and fintechs.
Home loan applicants at financial organisations such as HFCs and fintechs typically face eligibility criteria that are less strict than those at banks, especially when it comes to the cibil score range. This is in contrast to the stringent eligibility criteria that banks typically need. When it comes to reviewing loan applications, the higher degree of flexibility that is implemented by HFCs can prove to be advantageous for house loan applicants who are unable to access loans from banks for various reasons, such as those with a bad credit score.
Even if the interest rates offered by HFCs are greater than those offered by banks, individuals in this position should pursue home loans offered by HFCs and fintechs. If they find themselves in need of it in the future, they always have the option of transferring the balance of their house loan to a bank that offers rates that are cheaper after completing a cibil score check online by pan card free.
Make a larger down payment to reduce the loan-to-value ratio.
As a result of the fact that the guidelines issued by the RBI permit home loan lenders to finance up to seventy-five to ninety percent of the cost of a property in the form of a home loan, applicants are required to contribute a downpayment amount that ranges from ten to twenty-five percent of their own money. Nevertheless, given that lenders determine the LTV ratio for your home loan application based on their risk assessment and after taking into account the credit profile of the applicant, those whose creditworthiness is lower as a result of a low credit score may have a more difficult time getting their loan application accepted. Just like lenders, you can take up the credit check task by going for cibil score check online by pan card free.
Home loan applicants with a credit score in the lower side of the cibil score range
of 300-900 can select a lower LTV ratio by accumulating a greater downpayment rather than just meeting the minimum threshold of 10 percent to 25 percent. This will allow the applicant to choose a lower LTV ratio. If you did that, your chances of getting the loan approved would go up, and the amount of interest you would have to pay on the mortgage would go down overall. When you’re trying to save up for a larger down payment, it’s important to remember that you shouldn’t put too much strain on your finances or sacrifice other important financial goals in the process.
Initially, take the higher rate loan instead of getting a rejection.
Applicants who have a good credit score are given lower interest rates in accordance with the risk-based pricing practice that is being adopted by some lenders in the process of setting home loan rates for borrowers. On the other hand, applicants who have a poor credit score are given loans at a higher rate of interest. Given that a low credit score can result in an application for a house loan being denied, it is possible that in certain unavoidable circumstances, paying a higher interest rate may still be a preferable option to having to deal with numerous loan applications being turned down.
If you want to get the greatest possible offer, you need to make sure that you shop around for potential lenders before settling on any one of them. Visiting online financial websites/portals to compare various loan offers based on your credit score, monthly income, job profile, and other qualifying criteria is the best way to accomplish this goal and help to get cibil score check online by pan card free.
In addition, while you are servicing your house loan, you should make it a priority to make on-time payments of loan EMIs. This will help your credit score progressively increase over time and reach the upper side of cibil score range. Consider applying for a balance transfer on your current home loan in order to switch to a different lender that offers a lower interest rate and better service terms as soon as your credit score improves and reaches around the 750 mark or higher. This will allow you to pay off your mortgage faster and save money overall.