Improve Your Loan Bargaining Power
With the increasing affordability of residential property due to declining interest rates and easy availability of finance, the last few years have seen the home loan market grow at an annual rate of 30%. Although funds for purchasing of property is not difficult to obtain a good credit score reinforces your bargaining power with Housing Finance Companies (HFC) and Banks.
Credit score determines the grant of the loans we apply for. If we have a high credit score, lending institutions would consider us as good investments worthy of the credit they could extend. A credit score is a record of points that aims to gauge how responsibly we have paid our bills and our loans, how much we have tried to keep away from some dire financial straits, and how effectively we have managed our budget.
The universal standard in determining our credit score is the Fair Isaacs Company (FICO) system. This is the reason why a credit score is also called a FICO score. Credit score determines the applicable interest rate that would slapped on the loan we’re planning to acquire. Since a high credit score would make us less perilous investments for the lending institutions, they could afford to impose a lower interest rate. A low credit score, if ever it is granted a loan, would have a high interest to answer for the risks involved.
Since interest rates are inching upwards, it has affected the loan eligibility of home loan borrowers. Loan eligibility is inversely related to rates. As interest rates rise, loan eligibility becomes stiffer.
With a little bit of ingenuity home equity loan borrowers can enhance their loan eligibility. One very elementary method of enhancing the home loan eligibility is by opting for a higher tenure. This is so because the EMI (Equated Monthly Installment) per lakh, which an individual has to pay, starts to decline as the tenure increases. Another way of increasing loan eligibility is by way of clubbing incomes of spouse/father/mother/son.
Salaried individuals must ensure that variable sources of income like performance-linked pay among others are taken into consideration while computing their income. This in turn will imply that the loan amounts they are eligible for, stand enhanced as well.
There are many ways to increase loan eligibility. However, individuals need to keep in mind that increasing the eligibility can have an impact on their financial planning. For example, if an individual decides to prepay an existing personal loan for the sake of becoming eligible for a higher loan amount, he might be faced with a cash crunch. Hence a detailed scrutiny of one’s financial standing is warranted before opting for an inflated home loan.
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