Does CIBIL Score Affect Your Loan Against Property?

property loan

A good CIBIL Score acts like an unsurpassed achievement when approaching a bank or an NBFC for a loan. However, when availing a loan against property (LAP), it does not play a crucial role.

LAPs are secured loans, i.e., financial institutions require customers to pledge an asset as collateral. Hence, the credit score of a customer does not mean much when opting for a LAP.

Trustworthy lenders offer such loans against much-relaxed eligibility criteria. Additionally, Loan Against Property Interest Rates is comparatively very low than other financial services. Not only does this simplify the process of availing financing, but also helps you save on time.

However, lenders may reject a customer’s LAP application owing to low credit score and bad repayment history. Further, a low credit score would make it impossible for an individual to receive an unsecured loan.

A low credit score and bad history would mean that the applicant may have defaulted on a loan, missed out on EMI payments, and others.

In such cases, an individual can improve his/her score by following the steps mentioned below:

  1. Paying EMIs Within the Due Date

Paying EMIs on existing loans availed against products, financing or others within the stipulated date can contribute to increasing the credit score. Skipping a payment would not only lower this score but also invite additional fines with the EMI.

  1. Avail a Credit Card

Availing a credit card and handling all the repayments will have a positive impact on the credit score. However, having multiple credit cards will do precisely the opposite.

Also, closing a credit card that one has owned for a prolonged period is also not recommended as it may have adverse CIBIL Score effects.

  1. Paying the Total Credit Card Amount Due

Numerous individuals pay only the minimum amount required to keep their credit card from getting expired. However, the CIBIL Score can go down considerably if someone continues to do so.

Experts recommend credit card holders to pay off the entire outstanding credit card amount and that too within its due date. Maintaining a healthy credit card repayment history will automatically reflect positively on the credit score.

  1. Never Exhaust the Entire Credit Limit

Credit cards come with a limit, and experts recommend not to exhaust the credit limit. Utilizing more than this limit would mean a customer is a credit hungry. Moreover, individuals can have a higher chance of defaulting when they use more than their stipulated limit.

  1. Keeping the Loan Applications to the Minimum

With each Loan Against Property application, lenders will check the credit score of the customer. Every inquiry by a bank or NBFC will lower the score; hence, keeping loan applications minimal can keep the score from falling.

  1. Stop Applying for Loans if Rejected once

Similar to an inquiry, a loan against property India application rejection will hurt the credit score even more. Lenders usually provide a cause of refusal against the customer’s credit history. Another lender, after seeing this cause, may reject the loan application too.

Multiple loan application rejections will pull down the CIBIL Score considerably. So, the smart move to do here will be to wait after one rejection and find other ways to improve this score.

  1. Keep a Check on your Credit Score

Experts recommend checking one’s credit report regularly as calculation errors may occur. Such an error may lower their score and will require immediate addressing. One can apply for an online grievance redressal or contact the relevant authorities for rectifying the error.

credit score

In addition to a credit score, one also needs to fulfill the following:

  1. Documents

The loan against property documents required is:

  • KYC documents.
  • Salary slips of the last month.
  • Bank account statements.
  • Address proof.
  • Relevant documents of the property to be mortgaged.
  • Income tax returns.

Self-employed individuals may need to provide business proof documents and certificates.

  1. Criteria

The loan against property eligibility needed includes the following:

  • Salaried applicants need to be between the ages of 33 to 58 years. Self-employed individuals need to be between the ages of 25 to 70 years.
  • Self-employed individuals need to have a regular source of income. Salaried individuals need to be employed with a private or public enterprise.

When faced with a low CIBIL Score, the ways mentioned above can help in increasing it. With a high credit score, one can get a loan against property processed in the minimum possible time.