As per Hero FinCorp Limited's policy, there is no specific credit score requirement for a loan against property. However, it is important to note that the CIBIL score is one of the factors considered when evaluating such loan applications. The CIBIL score, a three-digit number provided by the Credit Information Bureau (India) Limited (CIBIL), reflects an individual's credit history. It is based on the credit information in the CIBIL report, which encompasses the person's credit payment history across various loan types and credit institutions over time. CIBIL scores range from 300 to 900, with higher scores indicating a better credit rating. Building a satisfactory credit score usually requires several months of consistent credit activity. Let’s learn more about it. Why Does CIBIL Score Matter?
The CIBIL credit score is crucial for assessing your creditworthiness by financial institutions. It affects various aspects, including loan and credit card applications, interest rates, and approval limits. A low CIBIL score or being a CIBIL defaulter may result in rejection when it comes to a loan against property. While a high score improves the chances of loan approval. What comes out of this is that individuals with high CIBIL scores are more likely to get approved. Additionally, a good score provides leverage in negotiating lower interest rates on loans, and a score above 750 significantly enhances the likelihood of obtaining higher loans. Is CIBIL Score Required for Taking Out a Loan against Property?
Yes, a CIBIL score is required for taking out a loan against property. While a score above 800 is excellent, most lending institutions accept scores above 650. Although a low score doesn't necessarily result in rejection, it leads to lower loan amounts, higher interest rates, longer processing time, steeper processing charges, and fewer options with increased chances of rejection. So ensuring a minimum CIBIL score before a loan against property application is a step in the right direction. How Does A Bad CIBIL Score Impact Loan Against Property?
A low CIBIL score may limit your borrowing limit for a loan against property, potentially as low as 55% of the property value, compared to higher scores that allow borrowers to access higher loan amounts.
Lenders often charge significantly higher interest rates, around 3% to 5% more, on loans against property applications from individuals with low CIBIL scores, compared to those with good scores.
Non-Banking Finance Companies (NBFCs) may impose high processing fees on loans against property applicants with low CIBIL scores due to the perceived higher risk involved. Applicants with good scores usually enjoy lower processing charges.
With a low CIBIL score, loans against property applications may undergo extensive credit and background checks, resulting in longer processing, compared to faster approvals for applicants with better scores.
Individuals with lower CIBIL scores may be required to provide additional documentation, such as tax-related documents, utility bills, and multiple proofs of income channels.
Loan against property applications from individuals with low CIBIL scores may face frequent rejections, even for minor discrepancies in documentation or suspected misrepresentation, reducing their options and requiring alternative lenders who consider applications with Not Applicable (NA) or No History (NH) sections.
Conclusion
While obtaining a loan against property for CIBIL defaulters can be challenging, it is not impossible. We may still consider lending, although the loan terms may not be as favourable as those with high CIBIL scores Navigating the process requires patience, extra effort, and mental and financial preparedness. Expect higher interest rates and additional charges. With perseverance and proper planning, securing a loan against property is still feasible even with a CIBIL default. FAQ
1. Does CIBIL reset after 7 years? No, CIBIL does not reset after 7 years. The credit history remains on record, reflecting past credit behaviour of the individual. 2. Is being a defaulter legal in India? Being a defaulter is not illegal in India. However, defaulting on loan payments can have legal consequences and negatively impact creditworthiness when you apply for a new loan. 3. What is the period of CIBIL's history? CIBIL history typically covers a period of up to 7 years, reflecting an individual's credit behaviour and repayment track record. 4. Which loan does not require a CIBIL check? Certain loans, such as secured loans against collateral or loans from informal sources, may not require a formal CIBIL check. However, Hero FinCorp relies on CIBIL scores for loan approvals. 
