Why CIBIL Score for Home Loan Is Important?

1. Why CIBIL Score for Home Loan Is Important? There are various factors that determine your home loan application. Banks and NBFCs do a thorough check on your Age, Employment Status, Employer Credentials, Net Monthly Income, CIBIL Score and more so. Imagine, if you have a red flag in one or more factors, will you get the home loan? Yes, chances are you might bag the home loan only if you have maintained a good CIBIL score. Having a good CIBIL Score can up your chances of getting the home loan even when other factors are not so strong. Is CIBIL Score for Home Loan as Important as Personal Loan? CIBIL Score holds important in all types of loans and lending products. The Reserve Bank of India has made it mandatory for all banks and Non Banking Financial Companies (NBFCs) to check ​CIBIL​ score before approving any type of lending products (credit cards, personal loans or home loans). Of course, the level of checking varies from product to product. This is because the nature of the product is different. For instance, personal loans are unsecured in nature whereas, home loans are secured in nature. Checking of one factor might hold more importance in the case of personal loan, but, the same factor will be of less relevance in the case of home loans. Similarly, the level of importance of CIBIL Score is true for both Home Loans and Personal Loan, but its weightage differs. To understand this, we need to know to know what is the major difference between personal loans and home loans. What is the major difference between a Personal Loan and HomeLoan? We all know the common differences - home Loans are taken to own a house, personal loans are taken to meet immediate financial needs; normally, home loans involve huge amounts because building a house needs way more money than meeting short term needs. But let’s jump to the major difference - the nature of these two. Personal loans are unsecured in nature, implying the applicant must pledge securities in order to avail it. While, home loans are secured in nature, meaning the applicant has to pledge securities in order to avail it. The reason being, home loans are hefty amounts given by banks and NBFCs, inviting high risk along with it. So, in order to trust the applicant with the loan amount, the bank asks to submit collateral. Which is not the case, when it comes to personal loans. How does CIBIL Score Fit the Frame? CIBIL Score is a projection of one’s repayment ability. It is your financial report card

2. showing how good or bad you’ve been in terms of servicing your debt. Based on this score, the banks grant you loan. This is what gives them confidence in your repaying ability. Since personal loans are unsecured in nature, banks make it mandatory to check your CIBIL Score, because they have no other go to trust you with the loan. While CIBIL Score for home loan can be discounted to some extent. In the case of ​home loan default, the bank always has the option to seize your collateral or securities submitted at the time of application. Thus, CIBIL score holds relevant in both scenarios, but more in the case of home loans. What Score is considered to be a Good CIBIL Score for Home Loan? As mentioned earlier, ​CIBIL Score​ criteria in the case of home loans is not as strict as personal loans. Unlike personal loans, where a score of 750 and above is considered to be a good credit score, CIBIL Score for home loan is very lenient - a score of 700 and above is good enough because there are factors to get you through.