Do you know lenders consider the CIBIL score of the applicant as one of the most important factors for analyzing their eligibility for a home loan application?
Your credit score holds a tremendous amount of power in helping you get a 2 crore home loan EMI at a reasonable interest rate. It gives an assurance to the lenders that the individual is completely capable of repaying the home loan. It is not wrong to say your score can either break or make your dream of getting a home loan.
In this post, we are going to educate you about the ideal CIBIL score required for a home loan, what happens to your home loan application if you have a low CIBIL score and what are other ways to secure a home loan with a low CIBIL score.
But, first, it is important to know the CIBIL Score Required for a Home Loan
If you are applying for a home loan for the first time for a 5 crore home loan EMI and debating if 300 is a decent credit score or 800, consider the categories below.
When your credit score is above 750: In this case, you have a better chance of getting a 2 crore home loan EMI. With this credit score, the loan approval process will be completed quickly, and you can obtain a significant loan amount. Having this score also gives you the advantage of negotiating the interest rate, which is likely to be reduced, with the lender. In a nutshell, the entire process of applying for a home loan is simplified.
600-749: A person with a credit score between 600 and 749 represents a modest risk to the institution for a 5 crore home loan EMI. The applicant can get the loan application authorized by ensuring that all other standards of the bank or NBFC are met. Other criteria such as monthly income, income stability, and other long-term responsibilities will also be considered with this score.
300-599: This range implies a bad credit score, and you are unlikely to be approved for a home loan with this value for a 2 crore home loan EMI Because it is the polar opposite of a positive credit behavior history, most lenders will immediately reject your house loan application.
How Does CIBIL Score Can Affect Your Home Loan Approval Chances?
A low CIBIL score can affect somebody’s home loan application in a number of ways:
1. Refusal of a Home Loan Application: There are many reasons why home loan applications or your application for instance for a 2 crore home loan EMI got rejected. Low income, unpaid or delayed bills, and low CIBIL score to name a few but when it is combined with a poor credit score, it can have an impact on the approval process and banks without hesitation will reject the application. However, it is seen that even if the individual falls under the higher income bracket and has paid their bills on time, their home loan application can still be rejected if their CIBIL score isn’t above 700. It is because a poor credit score for a home loan produces a commotion that makes an applicant a high-risk borrower. Hence, it is highly advisable that before applying for a loan, check your credit score and make sure that everything that will or can affect the loan procedure is in order. In case your credit score is not above 700, it is suggested to work towards improving it before you apply for a home loan.
2. Getting a Home Loan with a Higher Interest Rate: Securing a 2 crore home loan EMI is a watershed moment in one’s life when it comes to homeownership. It is crucial to note, however, that each applicant’s approval process is unique because of the terms and conditions regarding interest rate, tenure, and loan amount the applicant received. If your credit score is between 650 and 750, you will still be approved for a home loan, but at a higher interest rate than those given to applicants with scores of 750 and above.
3. Securing a home loan at Disadvantageous Conditions: The interest rate and loan term are important factors in determining the 5 crore home loan EMI. A tenure might last up to 30 years, depending on the applicant’s age. However, having a low credit score for a home loan will put you at a disadvantage since the lender will view it as a risk and will require you to pay a larger down payment.
How to Get a Home Loan With CIBIL Score?
Here are a few options for getting a home loan despite a poor CIBIL score.
1. Contact an NBFC for a home loan: A Housing Finance Company (HFC) is a form of NBFC that only deals in Housing Loans. When it comes to accepting a home loan application based on the applicant’s CIBIL report, banks often have stricter rules than NBFCs. Thus, applying to NBFCs for a Home Loan has a larger possibility of approval than applying to banks. However, it should be noted that NBFCs often charge higher interest rates than banks.
2. Add a Co-Applicant with a High CIBIL Score: It is usual practice to apply for a 5 crore home loan EMI with a co-applicant in order to improve one’s CIBIL score on your home loan application. If you have a lower CIBIL score and your co-applicant or guarantor has a CIBIL score above 750, some banks may approve the Home Loan you have applied for. It should be emphasized, however, that this strategy does not ensure approval for a home loan with a low CIBIL score. Such circumstances are uncommon, and it is up to the bank’s discretion to approve a Home Loan when one of the applicants has a lower CIBIL score. Banks frequently refuse 5 crore home loan EMI even if one applicant has a CIBIL score of 750 or higher and the other candidate has a score of 550 or below.
Lastly, work on improving your CIBIL score
Having said that, a low CIBIL score is usually a hindrance for many lenders when it comes to granting a Home Loan to an individual with a low CIBIL score. After securing 5 crore home loan EMI, you should endeavor to raise your CIBIL Score. Paying off all of your obligations, regularizing your loan repayments, and so on are all excellent ways to increase your credit score.