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Your abode is not just your permanent address, but a symbol of your overall personality. People, especially in India, give utmost importance to having their own shelter. Considering this, banks have designed various home loan products that people can consider while buying homes.
Kinds of Home Loan
Home loans are offered for various reasons. The applicant can opt for either of these based on his requirement.
- Home Loan: The first and the primary kind of home loan is to either buy a newly constructed house or a property that you consider buying as a second sale. This is the most common form of a home loan that people apply for while buying a new house.
- Home Improvement Loan: This kind of loan is very popular in the foreign countries. However, its demand is increasing in India, as well. People now understand that the interiors of your abode say a lot about your personality. Apart from this, it’s important that you maintain your house and offer a fresh look to it after a few years. You can consider Home Improvement Loan either for painting work, electrical work, flooring, tiling, compound wall construction, etc.
- Home Extension Loan: Considering the requirements of a growing family, banks offer Home Extension Loans either to build an extra room, floor, and extension. It’s better to extend a portion of your house to meet your growing needs rather than buying a new property altogether.
Documents required for availing Home Loan
- Below is the list of all the documents that the applicant needs to submit to the bank to get a home loan sanctioned:
- Properly filled in Loan Application form
- Signature proof – Driving Licence, PAN Card, Passport
- Valid Identity proof like Passport, Voter’s Card, Aadhar Card, Voter’s Id, Ration Card or any other Identity Proof accepted in India.
- Bank account statements for the last six months.
- Form 16 and last three months’ salary slips
- Residence Proof like Passport, Gas bill, etc.
- Proof of Age – Birth Certificate, Driving License, PAN Card
- Processing fee cheque.
Your home is your biggest asset, but unfortunately, home loan on it is the worst liability. You may have borrowed the amount from the bank for buying a house, but due to uncertainties, you are unable to repay. Under such circumstance, either the bank or you initiate the process of home loan settlement. You ease yourself by negotiating with the bank and settling for an amount to get rid of every month’s EMI burden. However, do you know that any loan account settlement affects your CIBIL score badly? It drops down your credit score drastically and leaves you midway in any future financial help.
A CIBIL score is a three-digit number generated by the credit bureaus that sums up your entire credit history. This score is derived from analysing your borrowing and payment details. Please note that your Credit Information Report (CIR) does not take into account your savings, investments and fixed deposits. This score ranges from 300 to 900 wherein 750 is considered as a decent score. If your score is below 750, then there will be difficulty availing the loan. Hence, it is important to follow a well-calculated procedure while settling home loan account so that your credit score does not get affected badly.
- Recover Original Documents: While applying for the loan, the applicant submits original property documents to the bank. It is extremely important that you recover those to avoid any future complications. If needed, you can pledge these documents with the bank later in future and get a loan whenever required.
- No Objection Certificate: It is very important that you get a No Objection Certificate (NOC) from the bank. This certificate clearly mentions the amount borrowed, property for which the amount was borrowed and the details of both the parties. It also states that the account is closed and there are no dues left. This NOC is a significant document that will play a crucial role in avoiding any negative impact on your CIBIL score.
- Documents Are Not Misplaced: Banks keep all the borrower’s documents in one centralized place which is in Mumbai. There are chances that a page from the original document might get misplaced. If you fail to check it on time, you might not recollect it if you ever want them in future.
- CIBIL Database Is Updated: Whenever a person borrows loan from the bank, these financial institutions are very proactive in reporting the borrowing to the credit bureaus. The timely update is sent on EMI payments, default, closure, settlement, etc. However, sometimes they might fail to update the status which will have a negative impact on your credit score. Ensure that your bank updates the credit bureaus before the process is closed.
So, how to improve CIBIL score after home loan settlement?
Yes, you will have to take calculated steps to build your credit score after home loan closure. This cannot be done immediately. You will have to work towards a good CIBIL score to avail financial help in the future. The following will help:
- Convert your loan status: – Ensure that the bank gives you a “closed” certificate rather than a “settled” certificate for any loan settlement you do with them. A “Loan Settled” certificate is an indication that the borrower lacks funds and hence the account is being settled. This will lower your credit score and create problems in the future. It is wise to end the deal with a “Loan Closed” certificate.
- Pay your bills regularly: Did you know that failure to pay the electricity bill, phone bills, credit card dues, etc. has a negative impact on your CBIL score. Hence, ensure that you pay all your bills on time. All these play a significant role in developing a positive credit history.
- Close unused accounts: We may knowingly or unknowingly have accounts with different banks. Sometimes, we fail to maintain a minimum balance in these accounts. This practice effects your credit score very badly. Close all unwanted accounts immediately to develop your credit score.
- Take credit to build a positive credit history: If the lending agencies fail to find any borrowing history, they will avoid lending you. Hence, borrow money any repay on time to build a good credit history.
Settling accounts is a common practice, but you will have to be smart and work towards developing an acceptable score again. A few steps and smart moves will raise your CIBIL score to a decent level.
Do not know how settle home loan or improve credit score after settlement? Creditseva will guide you through the entire process and will ensure that you get a credit worthy again.
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