Sunday, December 18, 2016

Is Low CIBIL Score a Dead-end for Home Loan Applicants?

Low CIBIL score seems like the end of the world for many home loan applicants. However, availing a loan is not that difficult despite a low score. 

Many individuals have a credit score of 0 or -1, which means their credit report says NA/NH. Due to this, such applicants face issues as many lenders steer clear from approving their loans because of no credit history. For banks, approving these loans is like gambling - there are 50-50 chances of repayments. Such individuals can simply get a credit card and make payments on time to build a good credit history. 

Home Loan Applicants

Individuals who have an ongoing credit history with a low CIBIL score can also get home loans, although through different routes. Let’s find out.

Leverage your monthly income

If you have a steady and growing monthly income with bank statements for proof, you can apply for a personal loan from banks or other financial institutions. 

Assistance from family and friends

You can turn to your friends and family to help you overcome this financial situation. Your family members and friends can help you in different ways such as:
  • Joint loan applicant: If the credit score of your family member or friend is good enough to apply for a home loan, you can go for a joint loan, i.e. become a co-signer. It will boost your chances of getting your home loan approved even without a good CIBIL score. 
  • Guarantor: You can ask your family member/friend with a good CIBIL score to become a guarantor for your loan. In this case, the lender will only consider the guarantor’s score and not your. 
  • Direct Loan: Your friends and family can lend you money to fund your big purchase. If they want, they can even charge you an interest rate a bank would. 
The things you must consider with this option is that a guarantor and a co- applicant will be held liable the same way you are. Ensure that there are no default or delayed payments on your part. 

Collateral Loans

If you have no other means, you can go for loans against assets, which are offered by lenders even if you have a bad credit history. The assets that you can loan against include gold, Insurance Policy, FDs, PPF account, etc. The amount you get against assets is solely based on the value of the assets.

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