Lenders are increasingly using credit scores as a measure of a borrower’s creditworthiness in a variety of credit applications and parameters, from establishing eligibility to setting loan interest rates. However, even if credit scores are becoming increasingly important and significant, people with poor credit scores can still obtain loans to achieve their goals, such as purchasing the property of their dreams with the help of a housing loan.
So, adopting the following smart and useful tips can be helpful to prospective homebuyers who are seeking a housing loan despite having a low icici bank cibil score:
Select a lower LTV ratio
The loan-to-value ratio (LTV ratio) indicates the percentage of your property’s worth that has been sanctioned as a loan by the lender. Lenders determine this percentage while reviewing your house loan application on the basis of their risk assessment and the credit profile of the loan applicant, among other factors. Applicants who are regarded to have poorer creditworthiness are typically provided with a lower LTV ratio, meaning that they would be required to contribute a larger sum from their own funds as a down payment. The Reserve Bank of India has set a maximum LTV ratio of up to 75-90 percent of the property’s worth as the top limit.
Due to the fact that icici bank cibil score is considered one of the most crucial characteristics in determining an applicant’s dependability, lenders frequently reject loan applications that have a poor credit score. In such instances, house loan applicants might improve their chances of loan approval by making a larger down payment, which results in a lower loan-to-value ratio requirement. In addition to lowering your LTV ratio, making a larger down payment increases your chances of being approved for a loan.
Add a guarantor or a co-applicant to your application.
When lenders are unsure about an applicant’s ability to repay a loan, they frequently impose the necessity of a guarantor or a co-applicant in order to increase the likelihood of approval for the loan. In light of the fact that a poor icici bank cibil score can be damaging to your home loan approval chances, including a co-applicant or guarantor with sufficient income and a good credit score can increase your chances of loan approval and may even increase your entire loan eligibility.
Because the co-applicant or guarantor would be jointly and severally liable for the loan repayment, the lender’s safety net is enlarged, allowing them to approve the loan application in question. However, when adding a co-applicant or guarantor, keep in mind that any type of delay or default in loan repayment can have a negative influence on the credit ratings of your co-applicant and guarantor, in addition to harming your own credit score.
NBFCs and HFCs should be approached if banks reject an application.
Home loan applications from financial institutions such as nonbank financial companies (NBFCs) and housing finance companies (HFCs) are typically evaluated with less stringent criteria than those submitted to banks, which frequently results in loan approvals for those who have been turned down by banks. Home loan applicants with poorer icici bank cibil score might therefore turn to NBFCs and HFCs after being turned down by traditional lenders, as the chances of loan acceptance from NBFCs and HFCs are higher than those from traditional lenders. However, keep in mind that non-banking financial companies (NBFCs) and housing finance companies (HFCs) typically charge higher interest rates than banks.
Furthermore, when you submit several loan applications to different lenders directly, each lender obtains a copy of your credit report from the appropriate credit bureau, which is referred to as a hard inquiry. Such inquiries are recorded in your credit report, and they may have a negative influence on your icici bank cibil score as a result. Instead, consumers could consider visiting online financial markets, which allow them to compare and choose the most suited lender for their financial needs and eligibility in a straightforward manner. Generally speaking, credit report inquiries started by such sites are called soft inquiries, which have no impact on your credit report or score in any way whatsoever.
Accept a higher interest rate initially before doing HLBT later
Wait before you get confused or think, what advice is this.
The increasing significance and importance of credit scores make their job no longer restricted to being an eligibility criterion. Nowadays, lenders have begun to even link their loan rates to the credit score of loan applicants, meaning that individuals with a low icici bank cibil score have been obliged to pay a higher interest rate on their house loans in recent years. In light of the fact that a low credit score frequently results in loan applications being rejected, paying a higher interest rate would still be a better option than being rejected several times.
Prior to settling for an expensive loan with a high-interest rate, you may try visiting internet lending marketplaces to evaluate several loan offers based on metrics such as credit score, monthly income, and other qualifying criteria. Check to see that your debt-to-income ratio, which includes the new EMI, does not exceed 50-60 percent while completing the house loan’s monthly instalment payment schedule. Consider taking out a loan for a longer period of time to minimise your EMIs, and try to prepay it to reduce your overall interest payments.
Once your loan has been approved, make sure you return it on time and in full since this will help to enhance your icici bank cibil score over time. Additional tips: Once your credit score improves and reaches the 750-800 range, you may be able to transfer your debt to another lender who will provide a lower interest rate and better service terms than your current lender. Make certain that the overall savings in interest payout is significant and balances the related costs, such as processing fees and administrative charges, before making this decision, as the balance transfer will be treated as a new loan application by the new lender.
