Importance Of A Good Credit Score For A Home Loan
Home loans are ideal for individuals who want funds to buy their dream house. Read on to know about the importance of good score for a home loan at IIFL Finance.
Home loans have become ideal for individuals who want funds to buy their dream house. Lenders such as banks and NBFCs offer home loans with flexible terms, which they must repay within the loan tenure. However, as there are chances of default by borrowers, lenders have created a set eligibility criterion to offer the home loan amount, which includes having a specific credit score.
What Is A Credit Score?A credit score or CIBIL score is a three-digit evaluation out of 900 that reflects a person’s creditworthiness to the lender during loan applications. An individual with a score closer to 900 is more capable of repaying a loan than those with a lower credit score in India. Lenders include having a good credit score for a home loan as an essential factor in their loan eligibility criteria. The most reputed credit rating agency, TransUnion CIBIL Limited, generates this credit score.
Almost all financial institutions include having a credit score as an eligibility factor (750+) when you apply for a home loan. The higher the score, the higher the chances of the lender approving your home loan. However, borrowers always have questions regarding a good credit score for a home loan and its importance while applying for a home loan.
Importance Of Having A Good Credit Score For A Home LoanWhile taking a home loan in India, the borrower is legally liable to repay the loan amount with interest to the lender within the loan tenure. However, borrowers occasionally fail to repay the loan by defaulting on the regular interest payments. Hence, in the eligibility criteria, lenders detail the credit score required for a home loan and offer the home loan amount only to individuals with a credit score higher than 750 out of 900.
It is essential to have a good credit score for a house loan because of the following reasons:
• Credit BehaviourAlthough lenders retain the house you buy from the home loan as collateral, they try to avoid selling the house to recover the loan amount. The CIBIL Score plays a vital part in the lender’s analysis of the borrower's credit behaviour. If borrowers have a good CIBIL score, they tend to repay all of their financial obligations timely and have a high possibility of repaying the home loan without default. It increases the lenders’ confidence and the chances of them approving the home loan.
• CreditworthinessWhen you apply to raise capital through a home loan, you must present your income sources and monthly earnings. If you are not getting the minimum salary, it may lead to the rejection of your home loan application. Lenders analyse the CIBIL score to see if your financial condition is good enough to repay the loan amount without any default within the loan tenure.
• Financial ObligationsHome loan repayment default by borrowers becomes highly possible if the applicant has existing loans. If the lender approves the home loan, it adds to the already present financial obligations. Hence, lenders analyse the CIBIL score to understand your loan-to-value ratio (the ratio of monthly income to financial obligations) to calculate if you can pay the home loan if offered by the lender. The loan-to-value percentage should be below 60% to be eligible for a home loan.
How To Have A Good Credit Score For Home LoansA good credit score for a house loan is crucial to raising capital to buy a house. If your current CIBIL score is lower than 750, you can take the following measures to improve your CIBIL score to ensure that the lender approves your home loan.
• Timely Repayments:Repaying EMIs on time is one of the most significant factors in increasing the CIBIL score. If you default on timely repayment of financial obligations such as credit card bills, loan EMIs etc., your CIBIL score will decrease. Hence, you should ensure you plan accordingly to repay your debts before the deadline.
• Credit Card Limit:Another way to have the credit score required for a home loan is by retaining the credit card limit available. When lenders check the credit behaviour, they analyse how you have used the credit card and if you are exhausting the credit card limit every month, it showcases that you are not earning enough to repay the home loan. Hence, it is wise to use a credit card accordingly.
Avail Of An Ideal Home Loan From IIFL FinanceIIFL Finance provides comprehensive and customised home loans in India to fulfil your capital requirement. IIFL Finance home loan offers funds up to Rs 2 crore with a quick disbursal process. The application process with minimal hassle and an attractive and affordable interest rate ensures the repayment doesn’t create a financial burden.
Q.1: How much loan can I avail of from an IIFL Finance Home Loan?
Ans: IIFL Finance offers home loans up to Rs 1 crore with a quick approval and disbursal process.
Q.2: What is the interest rate on IIFL Finance Home Loans?
Ans: The interest rate on IIFL Finance Home Loans ranges from 8%-25% depending on the desired loan amount and the chosen loan tenure.
Q.3: What loan tenure is available for IIFL Finance Home Loans?
Ans: The loan tenure available for IIFL Finance Home Loans ranges from a year to 30 years.
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