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Knowing whether you meet the minimum CIBIL score for a loan against property can let you prepare well before applying. This can help you get bigger loans at lower interest rates.

The CIBIL score is a three-digit number given by the Credit Information Bureau (India) Limited (CIBIL) based on an individual’s credit history. Credit scores range between 300 and 900, with higher values representing a better credit history. A score above 750 is considered good, whereas a score below 600 is considered poor. But what is the minimum CIBIL score required to get a loan against a property, and how can you check whether you meet it? Let’s find out.

How CIBIL Score Affects a Loan Against Property

Your CIBIL score affects the terms of any loan you take, including a Loan Against Property (LAP). Lenders will use it to evaluate your creditworthiness. A poor score may result in your application’s rejection. Here’s how CIBIL score can affect a loan against property and its terms:

Lesser Loan Amounts

A lower credit score will reduce your chances of getting a higher loan. For instance, if your property is worth â‚�2 Crores, you would get a loan of up to â‚�1 Crore only with a poor credit score. On the other hand, people with high CIBIL scores can expect a loan amount that is as high as 75% of their property’s value.

Higher Interest Rates

While you can get a loan against property even with a low CIBIL score, the interest charged will be significantly higher. This can range from 3% to 5% higher than those with good scores.

Higher Processing Charges

Processing charges are applied to complete the loan transactions and may differ from lender to lender. However, most financial institutions, especially non-banking financial institutions, often charge higher processing fees for individuals with low scores.

Longer Processing Time

CIBIL score helps lenders understand how much assurance they can have in getting their money back. They have to do extensive credit and background checks when the scores are low. This can increase the loan processing time.

Minimum Credit Score Requirement

The is 700. Some lenders will be willing to offer you a loan with a lower credit score, too. However, the catch is that they will ask for a higher interest rate and offer a lower loan-to-value (LTV) ratio. Lower LTV means that you can get a loan amount of only up to a certain limit of the total value of your property.

While you will still get a loan in this scenario, the terms won’t favour you. You can take this loan with higher interest rates, but if you are not able to repay in time, your CIBIL score will be impacted, adding to your financial burdens.

How to Check Your CIBIL Score

Checking the CIBIL score before applying for a loan is an ideal practice. Here are the steps to :

Step 1: Visit the official CIBIL website.

Step 2: Create an account to access your credit report for free.

Step 3: Fill in the required information and verify your identity.

Step 4: Give the OTP sent to your mobile number.

Step 5: Login again from the official CIBIL website after creating an account.

Step 6: Click on the button to check your CIBIL score.

How to Improve CIBIL Score

If your CIBIL score is below 700, you should improve it before applying for a loan against property. Here are some ways to improve your CIBIL score:

• Pay your EMIs on time
  Timely payment of loan instalments and credit bills shows responsible financial behaviour and improves your creditworthiness.
• Use credit carefully
  Avoid taking unnecessary loans even with a good credit score.
• Get a mix of loans
  It’s advisable to have a balanced mix of secured and unsecured loans with varying tenures and ensure timely repayment.
• Credit utilisation
  Try not to utilise the maximum limit of your credit cards.
• Review your credit history
  Monitoring your credit history regularly is a good practice.

Conclusion

The CIBIL score can significantly impact the eligibility of a loan against property. A credit score of at least 700 is recommended for borrowers. While applicants with low scores can still acquire loans, the terms may not be as favourable as those with high scores. It is important to monitor your credit history regularly and improve your scores gradually to optimise the amount and interest rates of loans against your property.