With multiple repo rate cuts from the RBI over the last few months and their subsequent effect on lending rates for various advances, availing loans is now affordable. Owing to the low-interest rates currently offered by financial institutions against advances like mortgage loans, more individuals are looking to avail them. Furthermore, existing borrowers are also looking to refinance their ongoing home mortgage loans, in a bid to lower their interest payments against the advance.
Now, while refinancing a mortgage loan is an easy process, borrowers will need to comply with a few requirements to be eligible for the facility. A good credit score is one such parameter, which significantly eases the process of mortgage loan refinancing for individuals.
Nonetheless, individuals with a poor credit score can also opt for this facility if they comply with a few additional requirements. Following is a look at how existing borrowers can refinance their home mortgage loans even if they have a less than desirable credit score.
The process to refinance a mortgage loan
Mortgage loans like loans against property are secured advances that allow individuals to meet several financial requirements without any hassle. Borrowers of this loan can easily opt to shift their existing loan amount from one lender to another and avail better property loan interest rates and other convenient terms.
Now, just like with new loan applications, lenders deem existing borrowers eligible to opt for a loan refinance only if they comply with a few specific criteria. Since an individual’s credit score represents his/her creditworthiness, lenders approve of the refinance application only if the borrower holds a healthy credit score. Thus, just as credit score affects loan against property eligibility, it also influences one’s chances of availing refinancing facilities like balance transfer.
How to opt for refinancing with poor credit score?
Individuals with a less than desirable credit score can undertake a few measures before applying for the refinancing facility. These are as follows –
- Document all income sources
Lenders can be willing to extend the balance transfer facility if borrowers manage to prove that they can repay their loans without hassle. In this regard, submitting documents of all income sources can effectively help individuals convince their financial institutions that they are capable of repaying the borrowed amount.
So, if a borrower has recently acquired a new source of income, or has received an increment, he/she must disclose the same to the lender to boost the chances of refinancing the mortgage loan.
- Apply with a co-applicant
Individuals can also opt to refinance their loans with a co-applicant or a guarantor holding a healthy credit score. This measure can be especially beneficial for individuals who themselves or their spouses hold a low credit score. For instance, if an individual’s spouse has a higher score, applying with him/her improves the chances of receiving approval for the refinancing application.
- Check credit report for errors and rectify
Sometimes, there can be errors and disparities in the credit report that can lead to reduced credit scores for individuals. Borrowers should, thus, check their credit reports thoroughly to ensure that there are no mistakes that have led to a drop in the credit scores. If found, they must apply for rectification with the valid documents
Apart from this, individuals can always try to take steps that help improve their scores before opting for a home mortgage loan balance transfer. It can be done most effectively by making timely repayment of all debts in amount. Thus, affordability is one of the most important factors to consider while taking a loan against property or any other advance.
In this regard, a mortgage loan EMI calculator can help individuals to compute their EMIs before borrowing the advance, allowing them to gauge installment affordability before applying.
Before proceeding, individuals must also check if the lender provides pre-approved offers that can make the process of availing the advance faster and easier. These offers are available on several financial products, including loans against property and home loans. Check your pre-approved offer only with essential contact details.
Other facts to note before applying for a loan refinance
Apart from ensuring that they are eligible to opt for a mortgage loan refinance, individuals should also take note of a few factors. For instance, borrowers must ensure that the lender does not levy a charge when providing the facility to refinance their loan against property. They should also check if lenders offer a top-up over the existing loan amount, to help meet additional financial obligations if the need arises.
With such factors in mind, borrowers can proceed to opt for a mortgage loan refinance even if their credit score is less than desired. Before applying, they must also check other terms of lending for a favourable deal.