Home Loan - Understand your credit profile

Home Loan - Understand your credit profile When you apply for a loan, banks judge your ability to repay the loan on numerous counts including your age, income, job stability and your credit report, which is a reflection of your true credit worth. You need to understand why this is the case so that you prepare yourself to submit a good application and ensure a strong credit profile which will help you obtain your loan without any hassles! Age factor is critical Home loans are generally available for maximum loan tenure of around 20-25 years. However, whether you can avail the maximum loan tenure or not is dependent on the age at which you take the loan. The age factor plays a key role in your available loan tenure especially if you are closer to your retirement which is typically assumed to be 60 to 65 years. Tip: If you are nearing your 50s but feel you need a 20 year tenure to enable you to pay your loan EMI comfortably, you could apply for the loan with your son or daughter as a co-applicant which will help you increase your loan eligibility and loan tenure. Place of employment and job stability Banks place a lot of importance on job stability and certain banks even insist that an applicant needs to be employed with a particular concern for over one to four years or more to be eligible for a home loan. Also, in instances where a reputed company’s future appears unstable, the bank can reserve its right to provide a loan to the applicant from that company. Tip: Remember, constant job shifts may affect your credit worthiness. Try to stick to a company for a minimum period of a year if you plan to apply for a loan or shift post your loan sanction! Even this time period is only fine during the initial years of your career. As you gain experiences its augurs well for you to have a longer stint at the companies you work for to account for job stability! Does gender really play a role? Till a few years back, banks were reluctant to provide loans for single women. The chief reason for this was the fear of the loss of income after marriage. Today, this perception has changed with women continuing to pursue their career post wedlock and double income families becoming very common. So many lenders are keen to tap this potential emerging segment and we are seeing gender play less of a role in loan approvals. However in certain cases banks still ask for a guarantor in case of individual women applicants. It should be the husband if she is married, parents or siblings if single. Tip: It is better to opt for a home loan with a co-applicant irrespective of gender. Anyways banks insist that co-owners need to be co-applicants, though they do not stress the opposite. This ensures a higher loan amount and better finance management in a double income household as the responsibility of the commitment lies with both individuals. Your past repayment track record This is another critical reason for your loan application to be processed smoothly. Have you been accumulating credit card dues over the years resulting in a huge pending payment, which is well past the due date? Or slipped up on your EMIs for a car loan a couple of times? In these instances, your name would have been reported to credit bureaus. When a bank looks up your credit card or loan repayment track record, this information will show up and mar your credit profile making loan sanction fairly difficult! Even if you are granted a loan, it will come at a steep interest rate! Also, telephone bills and insurance premiums are likely to join this list, so do keep a strict vigil on your entire bill and credit repayments. Tip: Your credit report can now be accessed by making an online payment at the credit bureau website. The report will then be physically dispatched to you. Get a copy of this every year for an annual review, if you are using a credit card or repaying a loan. This will help you prepare ahead if you need to apply for a loan! Here are some pointers to help you prepare for your loan: a. Gauge your repayment ability. Calculate your net worth and evaluate if you are ready for a loan commitment. b. Keep a tab on your credit score and review your credit report periodically and address discrepancies immediately! c. Ensure you have back up funds to pay your EMI for a bunch of months, for emergencies like a job loss etc. d. Make as much down payment as possible and prepare well ahead to close the loan as quickly as you can, to continue a good repayment track record

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