Can One Avail Home Loan with Low CIBIL Score?

Everyone nurtures the dream of owning a house as it gives you and your family a sense of stability and security. But, with ever-rising property prices, funding the purchase entirely on savings is extremely challenging. Therefore, taking a home loan can help you to become a proud homeowner early and that too, without much difficulty.

However, as easy it may sound, getting a home loan entirely depends on your credit score, which needs to be above 700. As the repayment tenure of a home loan is usually up to 20 years, lenders ensure borrowers pose a very little credit risk by only approving home loans to people with a good credit score.

But, if you have a low CIBIL score for a home loan, you can consider the following steps before applying for a home loan.

Take actions to improve your CIBIL score

If you fail to meet the minimum CIBIL score for home loan application, your priority should be to improve your CIBIL score before applying for a home loan. A few simple steps like paying out all your outstanding debt, fixing errors in the credit report, limiting credit utilization rate, regularizing payments through timely EMI payments can help to improve your CIBIL score.

However, you should note, the impact on the credit score will not be instantaneous. It will improve gradually over the next few months. Therefore, whatever steps you are taking should be aimed at making a long-lasting impact on the CIBIL score.

Don’t Apply for Too Many Loans in Quick Succession

Applying multiple loan applications in a short span severely impacts your credit score and takes months to reverse its impact. It generates multiple hard inquiries on your credit report, which the lenders take as an indication of credit hungry behaviour.

Hard Enquiry on credit report means a detailed analysis of your past credit behaviour to determine your loan eligibility. Every time a hard inquiry on your credit report is generated, it gets reported on your credit report with full details and the actions taken by the lender.

The best practice is to have a minimum gap of six months between two loan applications to avoid any adverse impact on the CIBIL score.

Include a Co-Applicant in the Home Loan Application

You can consider including a family member as a co-applicant with a stable income and good credit score if you need a home loan for low CIBIL score. Applying for a home loan with a co-applicant increases the chances of home loan approval and also you can get a higher loan amount.

In the home loan, the co-applicant carries the equal responsibility for the timely repayment of the loan amount along with the primary borrower. Therefore, in case of default, the co-applicant will take full responsibility in making payments towards repaying the home loan.

However, you should note, the co-applicant should have a good credit score, preferably above 700 and should be financially capable of helping you repay the EMIs.

Must Read : Impact of CIBIL Score on Your Home Loan Application

Apply for Home Loan with your Existing Lender

It is always better to apply for a home loan with a lender, with whom you have a good working relationship. Or, apply with an NBFC or Home Finance Companies (HFCs), because as compared to banks, HFCs have less stringent eligibility criteria.

If you have a higher account balance or substantial investments in the form of fixed deposits, recurring deposits, or mutual funds, you can lower the impact of a low CIBIL score on your home loan application.

Go for Higher Down Payment

Under normal circumstances, you are only required to pay up to 20% of the value of the home property as a down payment to avail of a home loan. But in case you have a lower CIBIL score making a larger down payment might make it easier for the lender to approve a loan. However, do note that this may only help you upto a certain extent, if you do not meet the lender’s minimum CIBIL score criteria, your application may get rejected.

Other Factors Considered by Lenders

While approving a home loan application, the lender also verifies the employment status of the borrower. Therefore, if you are employed in a reputed organisation or government organisation with decent employment stability, it can increase your chances of securing a home loan approval.

Conclusion

Under the guidelines of the Reserve Bank of India, a lender cannot approve a home loan without CIBIL score of the borrower.

Therefore, if you have a low CIBIL score and want to apply for a home loan, you can consider the above steps. You should note, it is quite difficult to get a home loan with a low CIBIL score, Even if you manage to get a loan approval, your home loan will be approved with a higher rate of interest, which will push up your overall buying cost of the house property.

SMFG Grihashakti offers home loans online at competitive interest rates. Apply today to get in touch with our representative.

Must Read : Tips to Reduce Your Home loan Interest Rate