Given the steeply rising real estate prices, buying a home would most likely mean you need to take a home loan. When you approach a bank or a financial institution for a home loan, they assess your application on different parameters, the most critical of them being your CIBIL score. A CIBIL score defines your creditworthiness and speaks of your loan repayment ability. The higher the CIBIL score, the higher are your chances of getting a low home loan interest rate.
Here is everything you need to know about CIBIL score for a home loan:
What is a CIBIL score?
CIBIL score is a numeric three-digit credit score allotted by the Credit Bureau TransUnion CIBIL, authorized by the Reserve Bank of India (RBI). The score ranges between 300 and 900, with 900 being the highest.
Your CIBIL score is determined based on your credit history, repayment history, existing loans, etc.
How does a CIBIL score impact a home loan?
Here are some ways in which a CIBIL score impacts your home loan eligibility:
- Affects the home loan interest rates: Lenders consider your CIBIL score when giving approval for a home loan and deciding the home loan interest rates. If you have a high CIBIL score (above 750), you can negotiate with the lender for a lower home loan interest rate and a higher loan amount. Conversely, a low credit score could hamper your home loan approval and reduce the likelihood of securing a loan at low home loan interest rates.
- Defines your credibility: Lenders assess your CIBIL score to know your credit health or your ability to repay the home loan. A high CIBIL score is an assurance for the lender about your ability to repay the home loan in stipulated time. Alternatively, a low CIBIL score implies a poor credit history, which can be risky for the lender. However, you can still get a home loan with a low CIBIL score in the case of a Non-Banking Financial Company (NBFC), but at high home loan interest rates. A low credit score can lead to the rejection of your home loan, especially if you are borrowing from a bank.
- Better loan processing: A high CIBIL score impacts the home loan approval process. If your credit score is high, many lenders would be willing to offer you a home loan. You have the opportunity to negotiate and get the best deal. You can use an online home loan EMI calculator to compare different home loan lenders. Also, you can get a high loan amount approval in such cases and better home loan interest rates. Further, your loan application is processed quickly, and funds are disbursed to your account in a short period.
What is the ideal CIBIL score for a home loan?
A CIBIL score of 750 and above is considered ideal for a home loan. However, if you are applying for a home loan from an NBFC, a CIBIL score of 700 is also workable.
Overall, lenders consider the CIBIL score when assessing your home loan application. Hence, maintain a high CIBIL score for swifter loan approval, low home loan interest rates, and higher loan amounts.
Top 3 Pyramid schemes to avoid?
Technology Has Changed The Landscape of the Lending Industry
Ways You Can Make Money Using Cryptocurrency