The role of your credit score in securing a Loan Against Property
Whenever you apply for a new Loan, you should meet specific eligibility criteria set by the lending institution. While Loan approval and terms depend on many factors, such as age and income, a CIBIL score is among the most important eligibility criteria for a Loan Against Property. Applicants pledge their residential or commercial property as collateral to get funds from the lender.
It acts as security for them if you default on the Loan repayment. The LAP eligibility calculator considers your monthly income, obligations, property market value, nature of the property, occupancy status, Loan tenure, and interest rate to compute the maximum amount you can borrow as a Loan.
What is the CIBIL score?
CIBIL score reflects your creditworthiness and shows how well you can manage your debts based on your past financial behaviour. It is a three-digit numerical summary of your credit history, ranging from 300 to 900. Lenders often use it to assess the risk of lending to a borrower. They have a minimum requirement of at least 700 to avail themselves of LAP.
Importance of CIBIL scores
A higher score means a stronger credit profile and lower risk for lenders. It is generated based on your repayment history, credit utilisation ratio or how much credit you use than the available limit, types of credit used, length of credit history, and recent credit inquiries. A higher CIBIL score indicates responsible financial habits, such as timely repayment of Credit Card bills, Loans, and other obligations.
These habits increase the likelihood of Loan approval with favourable terms, like lower interest rates, depending on how well you fit the overall eligibility criteria. Conversely, a low CIBIL score may result in Loan rejection or approval with stricter terms, which means a higher risk for the lender. Therefore, maintaining a good CIBIL score is essential for securing Loans on favourable terms.
Factors influencing CIBIL score for LAP
The Loan Against Property eligibility calculator and CIBIL score determine a Loan applicant’s repayment behaviour and creditworthiness. A few factors that influence the CIBIL score for LAP include:
- Credit mix
A balanced credit mix of Secured Loans (Home Loans and LAP) and Unsecured Loans (Personal Loans) can positively impact your CIBIL score. If managed responsibly, they show your ability to manage various credit products.
- Credit utilisation ratio
It is the percentage of available credit that a borrower has used. A higher ratio means financial strain and may lower the CIBIL score. Keep it below 30% to demonstrate high reliability when using the LAP eligibility calculator.
- Payment history
A history of timely payments on existing Loans positively impacts your CIBIL score when obtaining LAP. Late payments, defaults, or instances of Loan settlement negatively affect it.
Conclusion
If your credit score is below 700, you can boost it by paying debts on time, avoiding too many Loan applications in a short period, and reviewing your CIBIL report regularly to dispute any errors.
