Buying or constructing a new house is no longer for a few privileged in society as it was decades earlier and is not an impossible feat to achieve. However, with Globalisation and rising standards of living, financial institutions are offering attractive home loans with affordable Current Home Loan Interest Rates to all individuals. Obtaining loans is a crucial step in purchasing a home, and there are several aspects to choosing the best loan offers and providers. Similarly, Even Lenders have some criteria to provide loans to the aspirants.
All About Credit Score
A Credit Score is a three-digit summary from 300 to 850 that rates an individual’s solvency. Your credit score is dependent on your previous credit history.
Factors influencing credit scores are:
- Repayment history
- Types of loans
- Length of credit history
- Individual’s total debt.
- Income
- Assets
Benefits of a Good Credit Score
A good credit score also welcomes a few attractive offers like
- Lower interest rates
- Large loan amounts
- Simpler documentation
- Longer repayment periods
Eligibility for Home Improvement Loan
- A Credit Score is one of the critical criteria to avail of the loan, and it must be a minimum of 700 and above. The nearer to 850 scores would increase the chances of loan approval.
- The age Limit for Self-Employed Individuals is 21 to 65 years.
- The minimum Salary of ₹10,000 per month for salaried and minimum business income of Rs 2 lakhs per annum for self-employed, and the maximum Loan Term is 30 years.
Authorising Agencies
CIBIL™, Equifax, Experian, and CRIF High Mark are four authorised credit bureaus in India that provide a credit score.
How does the CIBIL score work?
- CIBIL gathers and systematises all your data and provides the same to all banks, NBFCs, and financial institutions when essential.
- All Banks and lenders provide data to CIBIL every month, based on which CIBIL prepares a credit information report (CIR) and credit score for each individual or organisation.
- Banks refer to the applicant’s history to decide on home loan approval.
- Credit scores help banks issue loans more efficiently and effectively by evading risky customers, thereby reducing non-payment.
- Home loans are one of the most highly availing loans, and the applicant’s solvency is critical to bring stability and to maintain quality in the bank’s assets.
- Once the loan application is submitted, Banks gather the applicant’s credit score and payment history from CIBIL.
You can check your CIBIL score by visiting the official website of CIBIL and filling in your basic identity.
Knowing your credit score even before applying for a loan can reduce the chance of a loan rejection by the bank.
With a good credit score and all the required documents in place, you can get a home loan approved for up to 85% of the total cost of the property. However, it is under the discretion of banks.
How can you maintain a good credit score?
- Pay your bills timely
- Do not over utilise the credit
- Do not close the old credit cards
- Limit the new applications, and multiple inquiries on credit card-This may seem a desperate act
- Have a check on your credit report regularly
- Understand your expenses
- Plan your finances
A few of the below reasons lead to a bad credit score
- Late payments
- Missed payments
- Maximum utilisation of the credit card limit
- Multiple loan applications
- Fraudulent activity
- System Errors
- Non-Closure of previous credits completely
Documents required along with Loan Application
- Identity Proofs and Address proofs ID – Voter ID/ Aadhar information, address, phone number
- General Bank information such as the name, address, account numbers, and six months of bank statements
- Three to six months of salary statements
- Authorisation letter from the employer, in some cases
- For the self-employed – tax returns and balance sheets
- Liability currently remaining
Key Takeaways
If you are browsing for Home Improvement Loans, you may find sorting through all the financing options challenging. Do not rush into things; instead, buy time and judge your financial capabilities before deciding on anything. If you can afford to put down a significant amount or have enough income, you can negotiate better with lenders and get the best financing options.
Current Home Loan Interest Rates keep changing in each bank, and you have your eyes and ears open for regular updates.
A good loan officer or banker should be able to help direct you through all the different programs and options, but nothing will serve you better than knowing your priorities and weighing the options for a home loan.
Resource: https://mezkit.com/credit-score-significant-factor-for-home-loan/
