Impact of CIBIL Score on Home Loan
Home loans are a long-term commitment. The tenor for home loans can stretch up to a maximum of 30 years. With such a long repayment tenor, it becomes crucial that a borrower avails themselves of the lowest home loan interest rate possible. A low-interest rate minimizes the burden of loan repayment by helping borrowers keep their EMIs within the affordable range. However, availing of a home loan on low-interest rates becomes possible only with a strong credit profile. All lenders check a borrower’s CIBIL score while deciding on their loan application as well as the terms and conditions of the loan to be extended to them. So, what is the CIBIL score and why is it important?
The CIBIL score is a three-digit number that depicts a borrower’s creditworthiness and repayment capacity. It also tells a lender the risk involved for them in lending money to the borrower. It is thus that all lenders check a borrower’s CIBIL score. TransUnion CIBIL is the most popular credit information agency in India and the credit score it assigns borrowers is known as the CIBIL score. The CIBIL score ranges from 300 to 900. To be eligible for a home loan in India, a borrower must have a CIBIL score of at least 750.
A credit score between 800 and 900 indicates excellent repayment capacity and creditworthiness. Borrowers who have such a CIBIL score not only get approved for a home loan quickly but also have very high negotiating power. They can avail a home loan on highly beneficial terms and conditions. Borrowers whose credit score ranges from 700 to 800 get approved for a home loan but do not have very high negotiating power. Having a CIBIL score below 700 can make getting approved for a home loan difficult. Let us now dive deep and look at how an individual’s CIBIL score impacts their home loan.
Impact of CIBIL Score on Home Loan
1. A Good CIBIL Score Makes it Possible for Home Loan Applicants to Get Approved for a Loan Quickly
A high CIBIL score indicates excellent repayment capacity. Such a credit score belongs to borrowers who have always repaid their loans without defaulting on loan repayment. These are people who have a stable income and job and a responsible attitude towards loan repayment. For lenders, the risk is minimal in lending money to such borrowers. Therefore, when a home loan applicant whose CIBIL score lies between 750 and 900 applies for a loan, lenders approve their loan application almost immediately. In conclusion, a good CIBIL score almost always guarantees quick loan approval.
2. A Good CIBIL Score Helps One Avail of their Home Loan on Low Home Loan Interest Rates
Home loans go on for decades. Thus, even a small difference in the home loan interest rates can help one save a significant sum. Home loan applicants are advised to try and avail of a home loan at the lowest interest rate possible. Low home loan interest rates translate into low home loan EMIs and help ease the burden of loan repayment. When individuals with a good CIBIL score apply for a loan, lenders have some surety that the applicant will repay their home loan on time and without defaulting. Therefore, for individuals with a good CIBIL score, lenders are more than willing to extend a loan at low-interest rates.
3. A Good CIBIL Score Also Helps Borrowers Avail of a High Loan Sanction
Buying a home does not only require one to pay the cost of the home but also take care of other costs, such as the home loan processing fee, shifting charges, and interior costs. Availing oneself of the highest loan sanction they are eligible for eases the process of buying a home and shifting into it. A good CIBIL score helps borrowers avail themselves of a high loan sanction.
4. A Good CIBIL Score Also Helps Borrowers Avail Themselves of their Desired Repayment Tenor
When it comes to home loans, borrowers must avail themselves of a loan tenor that would allow them to repay their loan comfortably. Most borrowers choose to keep their loan tenor long as a long tenor helps keep loan EMIs under control and the cost of borrowing the loan under control. However, when borrowers opt for a long tenor, the risk involved for the lender increases. Therefore, if a borrower does not have a strong credit profile and a good CIBIL score, availing of a long tenor becomes difficult.
Final Words
If you are planning to apply for a home loan, you must maintain a CIBIL score above 750. Check your CIBIL score and go ahead with your home loan application only if your CIBIL score is above 750. If you do not have a good CIBIL score, do not worry. It is possible to improve the CIBIL score. Maintain a clean repayment history by paying your loan EMIs and credit card bills on time. Keep your credit utilization ratio under 30% and hard enquiries under control. Maintain a healthy mix of both secured and unsecured loans and your CIBIL score will automatically improve over time.