How to get a home loan with a low CIBIL score?

Your CIBIL score is an indicator of your creditworthiness. Based on your credit-handling history, credit bureaus in India assign you a credit rating. TransUnion CIBIL is one of the four credit bureau companies in India that provide credit information to banks. Since it is the most prominent credit bureau company in the country, its name has become synonymous with credit rating.

What is a good CIBIL score?

Credit bureaus in India assign a credit score, ranging between 300 and 900. A CIBIL score above 700 is considered good.

What is the best CIBIL score?

Having a good score may not be enough to grab the lowest interest rate on your home loan. For this, you must have an impressive CIBIL score. Almost all banks in India offer their lowest home loan interest rates to borrowers with a credit score of over 750.

Can you get a home loan with a low CIBIL score?

Since home loans are secure loans – your house acts as collateral against the loan – banks offer home loans to borrowers with not-so-impressive credit scores, too. However, in this case, they may charge a risk premium.

Let us look at SBI home loans as an example to understand this better. SBI, India’s largest lender, is currently offering the best home loan interest rate of 6.7% to applicants who have a CIBIL score of 750 and above. In case your CIBIL score ranges between 700 and 749, SBI will charge 6.8% interest on your home loan. This means that you will be paying 10 basis points more on your loan interest. For applicants with no credit history, i.e., no CIBIL score, SBI will charge 6.9% annual interest on home loans.

How to get a home loan with a low CIBIL score?

In case your CIBIL score is lower than 700, it would be ideal to build your credit score. However, if that does not work out for you, here are some options for you:

Approach NBFCs

Housing finance companies (HFCs) and non-banking finance companies (NBFCs) offer credit to those borrowers in India who find it hard to borrow from banks. While they have a higher risk appetite, NBFCs and HFCs will invariably charge a premium from you to lend money.

Apply for a lower amount

One way to show your creditworthiness to the bank is to arrange a higher down payment and apply for a low home loan amount. In case you are buying a property worth Rs 50 lakhs and you show the bank that you are going to pay Rs 30 lakhs from your own funds, they will have greater confidence in lending you the remaining amount.

No credit history is not all that bad

Having no credit history is better than having a poor credit history. As we explained earlier, banks offer home loans to new borrowers with no experience in the credit market by charging a premium. In case you can convince your bank to go with the no credit history record, it would be easier to get a home loan than with a poor credit history.

Apply for a joint home loan

Another way to secure a home loan without a good CIBIL score is to have a co-applicant with a better CIBIL score. You could also find a guarantor for your loan to get a home loan with a low CIBIL score.