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How Cibil Scores Affect Home Loans In India?
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There are a number of factors that the institution takes into consideration when looking at an individual’s home loan application. The reason why a financial institution takes a number of factors into consideration is to ensure that if the home loan in India is sanctioned, it will be repaid on time by the borrower. The CIBIL score is also called the credit score which basically is a digital summary of the individual’s credit history.
The reason why financial institution considers one’s CIBIL score is because it provides the lender with a window into the individual’s spending tendencies, past loans and credit card payments. This score helps the lender decide whether or not the borrower will be able to repay the loan in full and on time in the future. The CIBIL score can impact between getting an approval or a rejection on one’s home loan in India . There are many individuals who suffer from a low CIBIL score which may either cause their home loan application to be rejected, or their loan amount issued to be lesser than required.
To avoid a rejection and to improve one’s CIBIL score to ensure that they get an approval on their application for a home loan in India, there are a number of steps one must take:
The first thing an individual must do is reduce the number of credit cards he owns. Since credit cards are considered as a short term loan, they can affect one’s credit score causing it to be lower. One must cancel any credit cards he or she does not use on a regular basis to help boost their credit score.
Another step that one can take in is to improve their spending habits. The only drawback of following this step is that it may take a couple of months to improve the individual’s CIBIL score. Any unnecessary expenditure must be avoided and the individual must start planning his finances in advance to ensure his application for a home loan in India is accepted.
Finally, the one step that all potential borrowers must take is to attempt to repay any pending loans. Being able to do so will not only improve one’s credit score but ease the financial burden in future. Many financial institutions are uncomfortable with the idea of issuing a home loan to individuals who are already repaying other loans. The strain may cause one to default on the payments which are harmful for the institution as well as the borrower.
The CIBIL score plays a crucial role in whether or not one’s application for a home loan in India will be accepted or not. As long as one maintains a good credit score and does not default on any payments, his application is guaranteed to be accepted.
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