TransUnion CIBIL, the apex credit information bureau of India, recently revealed that home loans in the country had witnessed an account-wise and value-wise surge of 2.96% and 1.68% respectively. These statistics determine to a great extent that a large number of borrowers are struggling to repay their home loans, primarily due to lack of financial discipline. On top of that, a slow economy and recession make the situation even worse for them.
Quite evidently, almost all financial institutions are taking extra precautionary measures to reduce the defaulting amount. Needless to say, eligibility criteria are one of the most efficient ways to determine the repayment capacity of a borrower. It also implies that individuals opting for a home loan in India need to fulfil all the home loan eligibility criteria mandatorily.
However, irrespective of the eligibility of any specific lender, individuals can always follow some useful suggestions to improve on their ability in availing housing finance.
Tips to increase your home loan eligibility
Following are some of tips and tricks that individuals can try to improve their home loan eligibility.
Repay your existing debts
Accumulated debts can lead to debt traps for individuals, straining their finances significantly. While on the one hand, it requires immense efforts to repay the debts; on the other, it has the potential to lower one’s credit score drastically.
Therefore, it is essential for prospective borrowers to clear their existing debts, including the likes of credit card bills, entirely before applying for a home loan.
In this regard, lenders also assess the applicant’s debt-to-income ratio that denotes the percentage of one’s income which goes into repaying the fixed monthly debts, including a possible EMI amount for a newly applied loan. Therefore, it is wiser to repay all the debts and collect a loan closure certificate from the lender.
Take measures that help improve the credit score
Since lenders depend on the credit reports to assess individuals’ creditworthiness, you need to keep a close watch on this factor. Moreover, it is also required to adopt some healthy financial practises to improve on the same.
It includes –
- Paying credit card bills and other EMIs in time.
- Keeping credit utilisation ratio below to 40%.
- Refraining from applying for multiple credits simultaneously.
- Checking credit score from time to time to identify and resolve any discrepancy if found.
In this regard, you can also gain an insight into how a credit score can determine your home loan EMIs. Nonetheless, try to keep it up to 750 and above to be on the safer side.
Opt for a joint loan
Another excellent way to improve one’s home loan eligibility is choosing a co-applicant to borrow the funds, preferably one’s spouse. While it boosts the eligibility, it reduces the burden of EMIs significantly as well. Both such borrowers are also entitled to claim deductions under the Income Tax Act.
Choose an extended tenure
A longer tenure reduces the EMIs to a great extent, and thus pulls down the chances of defaulting on loan repayment accordingly. Though an extended tenure increases the overall cost of servicing a loan, it allows borrowers to repay the loan amount comfortably. It also makes individuals from the low-income group eligible for such a credit option, fulfilling the lender’s FOIR requirements as per their earnings.
Top financial institutions offer home loans with a flexible repayment tenure of up to 240 months to facilitate convenient and affordable repayment.
Some lenders also extend pre-approved offers that simplify the loan approval process while saving a lot of time. Such an offer is also applicable to different financial products, like loans against property, home loans, etc. You can check your pre-approved offer by sharing your name and contact number.
Cite all sources of income
Besides your monthly income, try to incorporate all your additional income sources to help your lender ascertain a decent loan repayment capability as per the advance required. In this regard, you can also mention the details of your fixed deposits, rental income, and other income sources to increase your home loan eligibility. Provide all documents to establish a high monthly earning for improved repayment capacity.
Moreover, you can also take assistance from a home loan eligibility calculator, which select NBFCs offer, to gauge your eligibility for this credit.
Documents required for availing a home loan
Apart from following these tips, individuals also need to submit a few home loan documents to be eligible for the same. The standard document requirement includes the following –
- Identity proof.
- Address proof.
- KYC documents.
- Last 6 month’s salary slips.
- IT certificate.
- Business certificates (for self-employed).
Alongside following the aforementioned tips to enhance your eligibility for a home loan, you should also learn about how to access your home loan repayment. This practice will prove to be beneficial in the long run in terms of managing your financial liabilities.