How to Apply for Home Renovation Loans with Bad Credit?

How to Apply for Home Renovation Loans with Bad Credit?

According to the Economic Times, only an estimated 220 million consumers are assumed to be creditworthy across India. This leaves over 60% of the population which don’t even have a credit score or have poor credit score. Financial institutions need applicants to have a decent credit score of 750 and above to easily approve finances such as loan against property.

Consequently, individuals with poor credit scores may face difficulties in acquiring finance from lending institutions. They might get a lower loan amount yet higher rate of interest. Therefore, individuals must know how they can opt for home renovation loan even with bad credit.

Since mortgage loan is a secured form of loan, financial institutions are at a lower risk, which increases the chances of them approving your loan application. Candidates with poor credit scores may as well include co-applicants that have decent credit scores and high income to better their chances of loan approval.

There are several other methods that allow an individual to apply for a credit with poor credit. Let’s take a look.

  1. Know your property value

Knowing the market value of the property you are willing to pledge as collateral for your mortgage loan is essential as it gives them a clearer idea on the loan amount they can expect. Financial institutions approve almost up to 75% of the property value as loan and candidates opting for more amount than that may get their loan applications rejected. Moreover, if you have a poor credit rating, you can mortgage an asset with a higher market price, reducing the risk of lending and increasing the chances of approval.

To further ease the process involving acquisition of loans, non-banking financial companies like Bajaj Finserv facilitates consumers with pre-approved offers. These offers are valid on multiple financial products along with home loans, personal loans, business loans, etc. Check your pre-approved offer by submitting just the essential details such as name and contact information.

  1. Fulfil the eligibility criteria

It is necessary while applying for a loan against property with a poor credit score to meet the required eligibility conditions determined by the financial institutions.

For salaried individuals –

  • Candidate should be an Indian resident within the age range of 33 to 58 years.

  • Loan applicants must be a salaried individual working at an MNC, private, or public firm.

For self-employed individuals –

  • A candidate must be an Indian resident within the age range of 25 to 70 years.

  • Loan applicants must have a regular and stable source of income.

A stable and high income source improves the creditworthiness of an applicant. You are more likely to repay the debt if you earn an adequate sum to pay for your necessities as well as the EMI.

  1. Choose suitable tenor

Before applying for a loan against property, consumers need to think about the loan tenor they choose as this has substantial impact over their financial standing. The tenor can impact your estimated monthly instalments as well as rate of interest.

Choosing a smaller tenor can help you acquire loans at a competitive rate of interest. However, longer tenor can ease your repayment capability as the estimated monthly instalments you pay will be less. Hence, it is of utmost importance to determine the ideal tenor of your loan against property.

  1. Produce required documents

Candidates must be able to produce the required documents in support of their application. This is one of the most essential steps of how a loan against property is processed.

Below are the documents a consumer must produce for availing a property loan.

For salaried individuals –

  • Bank account statement

  • Latest salary slips

  • KYC documents like Aadhaar card, PAN card, Voter ID, etc.

  • Copy of property documents that the applicant is willing to mortgage

  • Income tax return receipt

For self-employed individuals –

  • KYC documents such as Aadhaar card, PAN card, Voter ID, utility bills, etc.

  • Bank account statement of last 6 months

  • Copy of the documents of property to be mortgaged

Keeping these factors in mind will help candidates with bad credit scores to get approval of financial institutions and acquire funds for their home renovation. Meanwhile, candidates must try out ways to improve their credit score as it makes them creditworthy.

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