Getting a Housing Loan or any other financial loan for that matter with a bad credit score is a challenging task, but it’s not impossible. There are a few things you can do to compensate your bad credit score and get a Housing Loan.
Improve your Fixed Obligation to Income Ratio: In layman's term, FOIR is the ratio between your total income and the total of financial obligations you have every month. Let’s say your income is Rs 20000 every month and you are paying Rs 15000 as EMI’s, your loan FOIR ratio is 75% which should not exceed 50% ideally.
Keep your Loan to Value Ratio on the Lower Side: Loan to value is the ratio between the value of the property and the amount you are asking for a loan. As per RBI’s instruction, banks can only pay 80-85% of LTV. So, in case of bad credit, you can improve your chances of getting a loan by applying for a smaller amount of loan.
Find a Guarantor: When you’re sure that you can repay the loan without any difficulties, you can take help from someone with a sound credit score and nominate them as your guarantor. However, you have to be very sure about your capabilities to repay the loan, because your lender will hold your guarantor responsible if you can’t.
Add a Collateral with your Loan Application: People with a bad credit score can submit any asset as collateral and get a Housing Loan with bad credit. You can use the property that you are purchasing as collateral or any other property or asset of equal value to secure a loan.
Loan on a Higher Rate of Interest: Something is better than nothing at times when you desperately need the financial support. Thus, the last but not the worst, accept a loan at a higher rate of interest. When you’re on the right side of the bargain, which you aren’t, you can decide the interest rate and tenor of your loan, but here you’ll have to depend on your negotiation skills.
Conclusion: As long as you believe in yourself, there is nothing that can stop you from achieving your dreams, be it owning a house for that matter.
Keep your Loan to Value Ratio on the Lower Side: Loan to value is the ratio between the value of the property and the amount you are asking for a loan. As per RBI’s instruction, banks can only pay 80-85% of LTV. So, in case of bad credit, you can improve your chances of getting a loan by applying for a smaller amount of loan.
Find a Guarantor: When you’re sure that you can repay the loan without any difficulties, you can take help from someone with a sound credit score and nominate them as your guarantor. However, you have to be very sure about your capabilities to repay the loan, because your lender will hold your guarantor responsible if you can’t.
Add a Collateral with your Loan Application: People with a bad credit score can submit any asset as collateral and get a Housing Loan with bad credit. You can use the property that you are purchasing as collateral or any other property or asset of equal value to secure a loan.
Conclusion: As long as you believe in yourself, there is nothing that can stop you from achieving your dreams, be it owning a house for that matter.
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