How to get Home Loan with Bad or Low CIBIL Score

Low CIBIL Score

A home of one’s own is every person’s dream. Living in rented accommodation can never provide the kind of joy or the financial security that a home of our own can give. But with the daily rise in the prices of property, buying a home solely on the basis of savings isn’t everyone’s cup of tea. Home loans come to aid in this scenario. They help one to become a proud home owner without much hassle.

However, getting a home loan isn’t always the easiest of tasks. It depends on a lot of factors, the most significant being the credit score of the person who has applied for it. That needs to be above 700 in order for the loan to be sanctioned. Since the tenure of the repayment of the loan is up to 20 years, lenders ensure that they lend money only to people with a good credit score so that the credit risk posed is very less.Hence, if one has a low or bad CIBIL score, there are a number of steps to be taken before applying for a home loan.

Improving your CIBIL Score

re to meet the minimum CIBIL score for a home loan application, you should prioritise improving it before applying for the loan. Payment of all the outstanding debts, fixing of the errors in the credit report, limiting of the credit utilisation rate, regularising of the payments through timely EMI payments are some simple steps that can aid you in improving your CIBIL score.

Still, it is noteworthy here that the impact of all these won’t be immediate on the credit score. It will however help in improving it gradually over the next few months. Hence, the steps taken by you should be done keeping these in mind and should be directed at making a long-lasting impact on the CIBIL score.

Applying for too many loans is a big No, No

The one thing that adversely affects your credit score is applying for too many loans in quick succession. It might take many months to rectify the adverse effects of this, as this will lead to the generation of multiple enquiries on your credit report, which means that a detailed analysis of your past credit behaviour is made in order to determine your loan eligibility. Every time this type of enquiry is generated, it gets reflected on your credit report with all the details and the subsequent actions taken by the lender. This might lead the lenders to believe in a credit hungry behaviour.

Here it is important to note that the best way is to keep a minimum of six months between two loan applications in order to avoid any negative impact on the CIBIL score.

Including a Co-Applicant in the Home Loan Application

Inclusion of a family member, who has a stable income and a good credit score, as a co-applicant in the loan application is a sensible decision to make if you require the loan despite a low CIBIL score. It elevates the chances of the approval of the home loan and also increases the possibility of a higher loan amount. This is because, in the loan, the co-applicant is as much responsible for timely repaying the loan amount as the primary borrower. Hence, the co-applicant would bear the full responsibility towards making payments of the home loan in case of a default. Therefore, the co-applicant should be having a good credit score, mostly above 700 and should also be capable of helping you to pay the EMIs.

co-applicant's cibil score

Applying for Home Loan with the Existing Lender

Applying for a loan with a lender, with whom you have a nice working relationship is always advisable. In case this isn’t possible, then the next best idea is to apply with an NBFC or Home Finance Companies (HFC), as these have slightly more lenient eligibility criteria as compared to banks.

Apart from this, having a higher account balance or substantial investments in fixed deposits, recurring deposits or mutual funds can also help in your loan application and minimise the impact of a low CIBIL score.

Going for higher Down Payment

While normally, you are needed to pay up to 20% of the property’s value as a down payment; in case of a low CIBIL score, a larger down payment might make the approval of the loan easier. Here it’s noteworthy that this works only in certain conditions.

Other important Factors

The employment status of a borrower is also taken into account while considering a loan application. Hence, being employed with a reputed or government organisation can increase your chances of having the home loan approved.

Under the Reserve Bank of India guidelines, a lender cannot approve a home loan without the borrower’s CIBIL score. Hence, the above steps are important in order to procure a home loan, as with a low CIBIL score, your home loan would be approved at a very high rate of interest, which will ultimately push up the overall cost of the property. So, it is absolutely imperative to improve the CIBIL score before planning to get a home loan.


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