ips to Enhance Your Home Loan Eligibility
Getting a home loan from banks in India can be a challenge, if one has less to no understanding of the home loan eligibility criteria of banks and other lenders. Anyone planning to opt for a housing loan in India needs to not only understand the eligibility factors that lenders have in place but also learn the ways to maximize their chances to secure a good loan amount with lower interest rates. Below is a list of 5 simple tips to increase home loan eligibility for a hefty loan with less interest rate.
Timely repayment of EMIs on existing loans or credit card bills is a habit that all need to follow religiously. Any case of default in EMI payments shows the incapability of a person to repay, which generally means a lack of adequate financial resources. Untimely or non-payment of debts can have a major repercussion on the chances of getting a loan later on. Therefore, it is advised to make loan or credit card payments on time. In case, there is a lapse for any reason, it is better to repay all the pending amount and try to get back on track as quickly as possible.
The reason for this is Credit Information Bureau India Limited (CIBIL) and other credit information companies in India keep track of all the credit data of individuals and organizations, and banks and other lenders refer to these scores before approving any loans.
A good CIBIL or credit score is something all banks look for when they receive a home loan application. This score is a quick giveaway of the applicant’s past credit record. According to CIBIL, someone who maintains a credit score above 750 has more chances of getting a loan. Additionally, banks prefer to offer low home loan interest rates to these individuals because they recognize their timely repayment capacity. Anyone who wishes to know their CIBIL score can get the information for free online.
Suggested read: CIBIL Score in Home Loan
Banks are more likely to approve loans of those people, who have savings or current accounts in their bank. This is because these account holders are known to them over a period of time and who also avail their various financial services. These factors help banks to be in a better position to assess their customers’ repayment capacity having seen their financial transactions, on a month-on-month and year-on-year basis.
Therefore, it is advised that if a person has zeroed down on availing a home loan from a particular lender, the best way to get into their good books is to open an account with them and build a relationship, at least for a year. The next step is to check the home loan eligibility of the lender and try to tick all the boxes of their requirements.
Many financial experts advise that adding a co-applicant (with a good credit score) in a home loan application can boost the chance of quick approval, a higher loan amount, and a lower interest rate. The reason is that lenders combine the income of both the applicant and the co-applicant, as well as their credit scores. This gives them an assurance that there will be no hiccups with regard to loan EMI repayment. On the other hand, the applicants tend to get approval for a higher loan amount with a lower interest rate.
To know how much loan they can get and at what interest rate, applicants are advised to use a home loan calculator. This will give them a fair idea about their chances of getting an enhanced housing loan.
An advice that has worked for many people over the years is the choice of opting for longer repayment tenure. This automatically increases the chances of securing a loan as the EMI amounts are low, meaning there are fewer chances of lapses in payment. Lenders also look at it as a low risk, and subsequently, approvals are easy to get. However, the only downside to this approach is that the longer the tenure, the higher the interest rate. Even then if anyone wishes to choose this longer way of repayment, it is important to be aware of the interest that will accrue up with time, and to know about it, it is better to take the help of a home loan EMI calculator to get a fair idea.
Suggested read: Home Loan Tenure
Anyone planning to apply for a housing loan should declare his or her additional sources of income. It gives lenders the confidence that the loan EMIs will be paid on time. Additionally, it is also better to mention the savings and investments made in the home loan application because it shows the person’s attitude toward financial management.
This is one of the main factors that determines whether a person is eligible for a home loan. The higher the income, the chances of getting loan approval is easy and quickly, and it is the other way around for those with low income. Another benefit of having a higher income is that lenders tend to approve higher loans easily.
Eligibility to secure a home loan increases when a person is young because it gives confidence to the lenders about the person’s chances of repaying the loan amount. Also, it is assumed that a young person will go on to increase his financial wealth with time, and hence, there will be less risk of him/her defaulting.
A salaried person is more likely to secure a loan because of his or her stable source of income. In the case of business professionals or self-employed persons, the chances are less since there is a risk involved. However, those professionals who are able to maintain their bank balances that lenders feel satisfied with can also get good housing loans.
Applying for a housing loan can be a big decision for any individual, and with so much at stake, it can feel daunting too. However, by following these 6 simple tips, a person’s chances of getting approval for a home loan increase manifold, for sure.
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