When reviewing your application for a loan, lenders are likely to consider your credit score to see how creditworthy you are and to ensure that lending money to you is not a risk. So having a good credit score can help you secure higher loan amounts from top lenders and at a better interest rate. Typically, if your credit score is above 750, lenders are not wary of lending you a loan. However, if your credit score falls below 750, you may not be able to choose from the best loan offers.
Along with helping you acquire funding for various needs, a loan against property can also help you increase your credit score. Here is how.
Availing a Loan Against Property is easy
While many loans like a personal loan or business loan lay significant emphasis on your credit score when it comes to approval, a loan against property differs in this regard. This is because unlike unsecured loans, mortgage loan eligibility is simpler. Involves you pledging a high-value asset, i.e., a property. Keeping the locality, size and present value of your property in mind, lenders are more likely to view you as less of a risk. Hence, even if your credit score is not up to the mark you can still avail a loan against property. The fact that you are pledging a valuable asset can help you avail a lower interest rate too.
Making Regular Payments increases your Credit Score
When you have taken a loan against property and make regular payments towards the same, your credit score increases. Every successful payment made before or on the due date only reiterates the fact that you are financially responsible enough to pay outstanding debts on time. So, over time, this behaviour helps better your credit score. To make timely payment easier you can consider setting up automatic payments. This will ensure that you credit score doesn’t suffer because of late payments or insufficient funds in your account.
Additionally, to make repayment easy, choose a lender that offers you low interest rates and added benefits. For instance, Bajaj Finserv’s Loan Against Property offers you up to Rs.1 crore if you are a salaried individual and up to Rs.3.5 crore if you are self-employed. Here you can also gain from doorstep document pickup, online account management, minimal part-prepayment and prepayment charges, and flexible tenor options. Additionally, you can avail the Flexi Hybrid facility that allows you to borrow as you need and pay interest only on what you use. You can also choose to pay interest-only EMIs to manage your finances better.
Taking a Loan Against Property Improves your Credit Mix
If you already have an existing personal loan or credit card, taking a loan against property enhances your credit mix and hence helps you increase your credit score. It proves that you are financially responsible enough to handle all kinds of credit and their repayment. For instance, if you have a credit card and take a loan against property, your credit report will show that you are capable of taking care of both unsecured and secured credit. However, it is essential you avail a loan against property only if you can afford repayment of the same and manage payments on time. Or else it will do more harm than good.
Keeping the above points in mind you can take a loan against property to increase your credit score. However, remember to check the loan against property documents required. Failure to submit the necessary documents and not matching loan against property eligibility criteria will lead to rejection, which will further hurt your credit score.
By Lucia Adams
who is a professional writer and blogger.