The Importance of a Good Credit Score for Housing Loan Eligibility
Whether it is about a home loan transfer or availing a new loan, one of the prime factors to do first is to check whether you are technically eligible for it or not. The financial institutions/banks are not lending out money just because a potential borrower applied for it. They are required to follow specific guidelines and regulations while doing the same.
Around six months ago, when my wife and I planned to purchase an apartment in Gurugram, Haryana, we were looking for a housing loan. Believe me, availing this loan nowadays is as easy as ordering food from your smartphone. Just download the right application, and you are more than good to go.
What is a housing loan?
Also known as a home loan or mortgage loan, a housing loan is a type of loan that is used to finance the purchase of a residential property. When it comes to security, this type of loan is secured by the property itself. This means if, by any chance, the borrower fails to repay the loan, the lender has the complete right to foreclose on the property and sell it further to recover the outstanding amount.
The amount of the loan, rate of interest and tenure depends on various factors such as the creditworthiness of the borrower, income, and the property value being purchased.
What is housing loan eligibility?
In order to be eligible for the loan, the potential borrower needs to fulfil certain criteria set by the lender. It includes typical factors such as age, income, credit score, employment stability, and the value of the property being financed by the lender.
Typically, financial institutions/banks prefer borrowers with a stable income source, such as salaried employees or self-employed individuals with a regular smooth income stream. The credit score as well is taken into account as it indicates their creditworthiness and ability to repay the loan.
What is the importance of a good credit score for housing loan eligibility?
The credit score is one of the most important factors to consider while availing a home loan. It is basically a measure of the borrower’s creditworthiness and ability to repay the loan on time without any delay. Financial institutions and banks rely heavily on credit scores to assess the risk associated with lending money to a potential borrower.
If an individual has a high credit score, it indicates that the borrower has a good track record of repaying debts on time. This undoubtedly gives confidence to the lender that the borrower will make timely payments on the housing loan. So, therefore, this increases the chances of the potential borrower getting approved for the desired loan and getting a lower rate of interest.
On the other hand, if the credit score is low, it simply indicates that the borrower has a history of defaulting on loans or making late payments, which makes them high-risk borrowers. In such cases, the bank/financial institution may reject the loan application or offer it at a higher interest rate.
Which application is the best to avail a new home loan?
Here, I’d like to share my personal experience. Bajaj Finserv is one of the most reliable financial applications I ever came across. It is super easy to use, and the loan is disbursed instantly. Also, if you already have a home loan and are planning a home loan transfer, it is highly recommended due to its lucrative rate of interest.