If you know one thing about credit score, then you know that it plays a huge role in getting a loan. So, what are you to do if your score is not up to the mark? Well, you do have some options but let’s first briefly understand why a good credit score is important in the first place:
The banks approve a loan application faster when the credit score of the applicant is high and their repayment history spotless. On the other hand, it’s not easy to get a loan with low CIBIL score because a low score translates to high risk for the lender. In fact, the credit score is one of the first things that the banks check when they receive a loan application.
if you want smaller EMIs, then also you need a high credit score. This is because when borrowers look for a loan with a bad credit rating, then the lenders like to levy high interest rates to make up for the risk that they are willing to take. This results in bigger EMIs that can affect your monthly budget.
A high score allows you to obtain bigger loans without any problem. So, when you are in a cash crunch or need to make a big investment, then your high creditworthiness can be of great help. On the other hand, if your score is low, then you may not qualify for higher amounts in the loans and face financial challenges.
It’s not impossible to get a loan with low CIBIL score. However, your options are limited and you have to make extra efforts to get it. For instance, the following are some of the things that you can do to get the loan:
You can make it easier for the banks to give you a loan if you are able to get a co-applicant on board. For instance, if your spouse or sibling has a high credit rating, then it can benefit you in the loan application. This is because, in that way, the bank may ignore your own bad rating to some extent and feel comfortable enough to approve the loan. In fact, most people take home loans as joint loans as it’s easier and faster.
Peer to Peer or P2P lending has become a huge market in India. There are many NBFCs that offer flexible loans to people via the Internet. Since the loans are provided directly by other individuals, the process is simple and easier. Most importantly, these platforms are more forgiving than traditional banks and may grant you the loan even if your credit score is bad. However, there is just one problem, the maximum amount offered by these platforms is usually limited. So, you will also have to arrange another source to pay the full cost of the house that you are interested in.
The best way to go about getting home loans, personal loans, etc. is to improve your credit score before you submit applications. This is because, first, it will prevent your score from receiving damage due to multiple rejections. Second, it will grant you more options so that you can get the loan from the bank that’s offering the best interest rate and comfortable repayment conditions. Besides, if you ever need a loan again in the future, then you will need to have a good score. In other words, there is no way around it. So, you might as well start caring for your credit rating now.
A home loan is usually quite large and has a tenure ranging from 10-20 years or even more. Naturally, when you are going to repay a loan over such a long period, then you need the lowest interest rate possible so that your usual expenditure isn’t affected. And the only way to make it possible is to increase your credit rating as much as possible. So, check your credit report, start paying your credit card bills on time, clear old debt, etc. to give your rating an instant boost. Good luck!