A good credit score is an important factor in determining your extent of credit. This alto determines if you are eligible for the loans or not. If you are having a poor credit score you can still acquire a home loan.
A Case Study
Aaron intends to buy a property for 8 millions in the suburbs. He intends to pay 20% of the total amount and take a loan on the rest 80%. This is quite a feasible option to do. He even applied for the loan to his bank. He was shocked when his bank rejected his plea stating that he had a bad credit score. He didn’t realize what has happened to him because he was a simple man who always aided by the laws. What he forgot was that he had failed to make his credit card payments on time thrice. This was back two years. But this thing has affected the credit history of Aaron a lot.
Solution to His Problems
Most of you might be thinking that Aaron would not get the loan plea sanctioned. But no, he may still get the loan approved if he caters to some of the ways by which he can get poor credit home loans.
Choose a Lesser LTV
LTV means the Loan to Value. This is another ratio to the total value of the property that is adopted by the banks. The RBI states that the banks can offer the customers more than 80-85% LTV. Every bank, however, has maintains their own benchmarks. In the above-mentioned case of Aaron, he had asked for an 80% loan. This makes it to 64 lakhs. However, in the case of LTV he might opt for a lower loan say for 65% to 70% and increase own his contribution in that case.
Opt For a Lower FOIR
This means the Fixed Obligations to Income Ratio calculates the total amount of obligations that you have in one month. The bank fixes this ratio. They also restrict the amount of loan so that the EMI also becomes lower. If your loan has been disapproved by the banks you can still get it for a lower FOIR.
Add a Guarantor
Another very common way to get poor credit home loans approved is by adding the guarantee of a third person. The third person or the guarantor, in this case, needs to have a good financial position and a good credit score. This will help the people like Aaron to get loans even after having a lower credit score.
Compromise with Rate and Tenure
If you are having a poor score like Aaron you would not be able to negotiate the terms or tenure of the loan. You can ask your bank to give you the loan at a higher interest rate or maybe for a shorter repayment time.
When your bank rejects the loan application you can apply for any of these techniques. You can also find other techniques that might be available with the loan issuer to get poor credit home loans. This helps the people get the loan plea approved.