One of the most essential things to do when applying for a home loan is to check your eligibility. Housing finance companies and banks agree to approve the home loan only if the borrowers meet the set of eligibility criteria. On the other hand, those borrowers who do not fulfill the requirements of the lenders face rejection. Every lender has its method of calculation. For instance, the borrowers can use the LIC Home loan calculator or any other bank home loan calculator.
One of the most important factors that help in boosting your chances of home loan approval is getting a good credit score. People who are looking for a home loan must work on maintaining their credit score as a low score can lead to loan rejection. The ideal credit score for home loans is 750 or above. People must work towards maintaining their credit history by doing repayment of credit card bills without any default. All the previous home loans or EMIs must have been cleared before applying for a new home loan. But there are many ways through which borrowers can enhance their loan eligibility and one of the best ways is to calculate the loan amount beforehand using an LIC Home loan calculator. Let us have a look at the following steps that will help borrowers increase their loan eligibility.
Increasing your loan eligibility- Vital tips
- Repay the existing loan-
When borrowers apply for a home loan, the lenders go through their credit history to evaluate whether they have an existing debt or not. It is crucial to understand the credit history and their repayment capacity. The lenders try to find out if the borrower is capable enough to make repayments of prevalent loans and credit card bills on time. They also check if there is any skipped or missed payment as they can affect their credit score. Hence, it is advised to make repayments of existing debts without any default. Satisfactory credit history will increase the possibility of home loan approval.
- Choose a longer tenure-
Borrowers must opt for loans that have a longer tenure as it lowers the monthly EMIs. Longer tenure also provides additional time to make the full repayment of loans. This lessens the burden on the borrowers and allows them to repay the loan on time which further reduces the lender’s risk. On the other hand, the longer the tenure the higher interest you have to pay.
- Evaluate the affordability to repay and apply-
Before a borrower applies for a loan, they must evaluate whether they can afford to pay back the loan on time or not. They can also utilize the EMI loan calculator of the concerned bank or financial institution from which they intend to take the home loan. There are several digital lending portals available that help in easily calculating the monthly EMIs. The holistic information such as the interest component and principal of each EMI, etc will help to better plan the monthly budget.
- Improve the credit scores-
Having a good credit score plays a crucial part in getting a home loan approved. Therefore, borrowers must strive to maintain a good credit score that lowers the risk of the lender. It also helps in having a low-interest rate when availing of a home loan. Borrowers can check their credit scores online and download their credit reports from the website of the bank or financial institution.
- Opt for step-up home loans-
Step-up loans are one of the best loan options for people in the mid or early-career stage who have a low income. There are several lenders under step-up loans that offer low-cost EMIs in the beginning and gradually increase the amount. This extra time allows the borrower to become more secure financially and repay the outstanding amount later. The lenders evaluate the eligibility of the borrower based on their future aspects and current profession.
- Choose a joint loan-
Borrowers can also opt for a joint home loan to improve their home loan eligibility. The chances of home loan approval increase when an individual applies for it with another applicant, provided that he/she is employed and has maintained a good credit score. In a joint home loan, the lenders consider the profession and income of the involved applicants. The credit history of the applicants also improves and can be used for home loan approvals at a low-interest rate.
- Additional income sources-
Borrowers who have more than one income source can show them to the lending institution. The other income sources can be mutual fund dividends, fixed deposits, rental income, or business income. This improves the financial health of the borrower which can be used to get a higher loan amount.
- Choose the lender of your choice and open an account there-
The borrower must open an account in the lending institution at least a year before applying for a home loan. This will help the borrower to build a healthy relationship with the bank or the chosen lender. A good rapport will improve the eligibility of the borrower.