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When you find that house of your dreams, the first thing that springs to mind is to apply for home loan since it’s your ticket to funding the big purchase. But sometimes, loan applications get rejected for various reasons, among which the most common is a low CIBIL or credit score. It is major factor that determines your loan approval, loan amount and even rate of interest.

Why is high and low credit score important?

While a high credit score is viewed as a low probability of a default, a low credit score reflects the opposite, making financial institutions wary of the person applying for a home loan.

Credit score is a three digit number that ranges between 300 and 900. It reflects your creditworthiness as it is a summary of your payment history, outstanding balances, number of loans, total credit limit, credit utilization, every loan detail taken from different lenders. Higher credit scores are great for you if you are applying for a home loan. On an average, a credit score of 750 is great for borrowers as lenders find themselves at less risk. Moreover, at this score, you can get good deals on your home loan and better rates of interest.

Your credit score is impacted positively by:

● Consistent payment of loan EMIs
● Credit card bill payments on time
● No over-leveraging
● Payment of credit card bills in full as opposed to minimum due amount each time
● Good financial records
● Many types of credits, especially unsecured personal loans in family
● Good utilization of credit limit on cards

Your credit score is impacted negatively by:

● A lot of credit report enquiries by banks and financial institutions
● Dishonoured or bounced cheques
● Loan repayment irregularity
● Defaults on credit repayments and even defaulting as a guarantor
● Late payments on credit cards or making part payments consistently
● Number of unsecured credit (multiple personal loans)
● Numerous applications for unsecured loan, especially when rejected
● Going beyond the approved credit limit and even high utilization of it

Other than these, your credit score can also be impacted negatively when banks or financial institutions you are dealing with make errors in their records. Hence, it’s important that you keep checking whether or not your banks are submitting the right information. It comes really handy if you request and maintain a copy of your credit history personally as compared to a financial institution doing that for you.

CIBIL Score is a crucial aspect in determining your home loan eligibility. Every time you apply for home loan, your lender checks this score for approving/disapproving your application. It is a summary of your credit history as per your credit behaviour. It depends on the following factors:

Past payments: All your previous payments, whether on time or delayed, are recorded with CIBIL. Consistency in making payments is considered good whereas more recent delays are seen negatively.

Settlements, defaults and write-offs: Multiple write-offs, defaults on previous loans and more recent write-offs (as opposed to older ones) have negative effects on your credit score. Defaults and delays on secured loans are worse than on unsecured loans.

Credit as proportion of income: The higher the loan balance you have, the lower your credit score will be. Less loan balance shows smart credit utilization on your part.

Credit cards: If you have high credit card balances, your credit score will be low. Consistency in repaying credit card debts improves the score. Credit cards (unsecured loans) are viewed negatively by lenders as compared to secured loans.

Different ranges of CIBIL Score

Every person with a financial history has a CIBIL score and it can range anywhere between 300 and 900, with 900 being the highest. A person can also have a score of 0 or -1, which means that they have no credit history in terms of loans and credit cards. So to get the credit history started, you must have at least one credit card or applied for a loan. Here is a breakup of CIBIL scores and what it means:

• 550 – 650: It is a fair score and accepted by many lenders. This score shows that you have been quite regular with your repayments, other than a few exceptions. Most lenders trust borrowers with this score and approve their home loans but usually with a higher interest rates.

• 300 – 550: This is the worst score anybody can have and it means that you have been defaulting on your payments. With such a score, getting credit is extremely difficult.

• 650 – 750: For home loan eligibility, this score is very promising. And if you have this credit score, you will not face any issue regarding approval of application.

• 750 – 900: It is the best possible score anybody can have and it indicates your expertise at managing your finances. Lenders will approve even a larger loan amount to you at great rates when you apply for home loan.

Private lending companies will provide the facility of merging several loans into one and charge a lower monthly interest rate than the prevailing one. But it should always be carefully noted that federal loans provide better interest rate than the private ones and hence these two should be kept separate. Detailed information has been provided below regarding the advantages of consolidation and refinancing of student loan to have a better view of the two.

Advantages of Federal Student Loan Consolidation

Getting hold of an experienced and knowledgeable company equipped with a streamlined online application process provides its borrowers with an opportunity to save well before the subsequent loan amount is up for due. The hassles of searching for a reputed company has been solved by online service providers like financial hot seat who after comparing among several possible alternatives provides a list of the top six companies who have a good reputation in the market regarding student loan consolidation and refinancing. Unlike the traditional ways of borrowing money, the student loan consolidation facility provided via internet substantially reduces the loan amount to be repaid at the end of the term by keeping a check on the rate of borrowing. This is a big help for students who are the budding face of an economy and has been newly introduced in the job market.

Advantages of refinancing

There are several benefits of consolidating or refinancing a student loan, be it private or federal, which each and every borrower must know in order to derive the maximum possible benefit from its use. The advantages are briefed as under:

Convenience – Students who opt for loan refinancing needs to make only a single payment every month instead of multiple payments since refinancing combines all the existing loans of the borrower into a single loan amount.

Market fluctuations – The rate of interest prevailing in the market is quite volatile and is prone to frequent changes every year. Borrowers who have been paying higher interest on their existing loan have the opportunity to take advantage of any fall in the rate of borrowing which was not available at the time of initial borrowing.

Greater cash flow – Refinancing a number of loans into a single one will require lesser payment per month than each one being paid separately. This will indirectly lead to more cash to spend at the end of the month thereby ensuring improved cash flow.

Better credit history – Making a timely payment for a single loan is easier than individual payments being made. This creates a higher chance to improve the credit worthiness of the borrower increasing his chances to obtain more loans from the market easily.

Improved savings – The last but not the least is the advantage of saving a substantial amount of money when it comes to loan consolidation and refinancing.

A more detailed information about the beneficial effects of refinancing can be gathered from the internet and reliable sites like the financial hot seat to explore and experience its benefits in case the situation demands for exercising such facility.

Well, no one knows how debt can ruin your life. With the help of home equity, you have the liberty to stay on top of debts. Falling in debt is something, which you have always tried to avoid. Now, if you cannot, then there must be some mistakes with the monetary service, you have. Well, with the help of reliable experts and their proper guidance, it will be easier for you to handle the debts and to stay right at the top of your success ladder. All you have to do is just get in touch with the reputed experts, and try to procure their help for good. Once you are through with it, it will be easier for you to get rid of debt, once and for all.

Taking control of your cards

Credit cards are sure going to offer you with the lucrative options of buying products, without carrying cash. Well, it becomes difficult, as you have to be aware of the reputed packages, over here. Moreover, when you are using credit cards, you are not aware of the money you are spending on it. Therefore, at the end of each month, when the generated bill reaches your address, you feel like facing some problems with it. With the help of reliable experts, you can be out of this problem.

Controlling the usage of cards

To get rid of credit card debts, you are most welcome to take help o home equity services. You will not just get the feeling of taking control of credit cards, but your auto loans are other forms of debts, with the help of this package. Using the home equity loans for debt consolidation is likely to enjoy lower interest rates, which are flexible and not static. All you need to do is just make single payment on a monthly basis, and you have the liberty to consolidate your debt.

Some services to work into

Now, you must be thinking about the reasons to choose debt consolidated forums through home equity loans. Well, you are about to pay less every month. You just need to lower your current monthly payment, and it will lower your interest rates, automatically. Moreover, you have the right to make simple payment, once. Here, the experts are going to combine the high interest debts and turn them into one fixed payment ratio, on each monthly basis. You will further enjoy peace of mind, with experts to be your help.

Simplify your life with ease

With the help of home equity, you have all the liberty to simplify your life, and enjoy it without facing any problem or hustle. You will further get into the path of brighter side around here, by managing your current debts. You have the liberty to borrow any money, from $25,000 to even $150,000. It solely depends on the loan package you are willing to choose. However, make sure to check out the amount first and see if you can repay it back, on time.

If you are struggling with credit card debt issues then it’s better to seek for credit card consolidation loans first. It will help you in making things better for you and you can go ahead with peace of mind.

Personal loan interest rates are not as low as home or education loan interest rates. So if there was a way to get a personal loan on rates lower than what are actually available, it can significantly help reduce the interest burden on the borrower.

There is indeed a way to reduce the interest rates on personal loans. This way is to take a loan against your fixed deposits. There are quite a few benefits of this. First of all, you don’t have to liquidate your deposits. Second is that generally, personal loan eligibility is dependent on your credit history, current income and ability to repay the loan. But in case of loan against FD, the lender won’t bother much about your credit history as he already has your fixed deposit as collateral.

The biggest benefit of loan against FDs is the lower rate of interest. Personal loan interest rates can easily exceed 15%. But a loan taken against fixed deposit charge interest rate that is just 3-4% more than the rate of fixed deposit. And this can significantly reduce your EMIs.

Let’s take an example.

Suppose you need Rs 3 lac as loan. You have a FD (earning 8% interest) but you don’t want to liquidate. So you decide to take a loan against it. Your lender is giving your regular personal loan at 16%. But as soon as you show intent to borrow against FD, the rates reduce to 11%. How does it impact your EMI given the repayment period is 3 years?

Your normal personal loan EMI will be Rs 10,547.

Your EMI for loan against FD will be Rs 9822.

Though this difference of few hundreds might look small, it can give you significant savings over the 3 year period. Calculations show that you can save more than Rs 26,000 in lower interest costs.

Do not forget that in case of default in loan repayment, the lender can foreclose your deposit to recover the outstanding amount. So do consider taking a loan against FD, if you want to lower your EMIs and also don’t want to liquidate your savings.