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Bad Credit Home Loan

Home Loan with Poor Credit Score

Last Updated 22nd Jan 2022

A good credit score is one of the essential eligibility criteria to avail a home loan at lowest interest rates.

Lending institutions reject home loan applications if the borrowers have a bad credit score.

Tips to get a home loan with a Bad Credit Score.

  • Clear Previous Debts
  • Take a Joint Home Loan
  • Negotiate with lender
  • Apply for a home loan with an existing lender.
  • Look for a home loan from NBFCs
  • In case of a co-borrower, submit documents such as identity proof, income proof and address proof
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Bad Credit Score Home Loan

Buying a house is one of the most significant purchases that we make in our lifetime. However, with the increasing prices of property, it becomes challenging to afford a house with the annual income or savings. Thus, we need to apply for a home loan with various Banks or Non-Banking Financial institutions, which itself is a long-term commitment and time-consuming process. Also, to avail a home loan, it is essential to fulfil the basic eligibility criteria of lending institutions, one of such is having a good credit score. In case, when people do not have a good credit score, it may become difficult to get a home loan and thus they have to avail bad credit home loan.

Home Loan with Poor Credit Score Overview

Bad Credit home loan is the home loan availed by borrowers who have low or poor credit scores. It is because the lending institutions generally reject home loan applications with a poor credit score as they are considered as high-risk applicants. Therefore, in such circumstances, borrowers must look for alternative ways to avail a home loan with a low credit score.

How to Get Home Loan with Bad CIBIL Score?

As stated earlier, getting a home loan with a bad CIBIL score is a complicated process; borrowers can still avail a home loan by using the following methods:

  • Clear previous debts: To improve the credit score, in the long run, borrowers must clear all their past debts such as credit card bills, loan EMIs or utility bills etc.
  • Take a joint home loan: Adding your spouse as a co-applicant to your home loan can improve your home loan eligibility if your spouse has a good credit score and thus improve your chances of getting a home loan despite poor credit score. Along with that, you may also get additional tax benefits on your home loan.
  • Negotiating with the previous lender: Borrowers must also consult with the existing lender to settle any current debt in the form of loan or credit card dues and obtain a No-Objection Certificate for the same. Along with that, they must ensure that the credit score is updated in the credit report and does not have any discrepancy. In case of any such issue of a discrepancy, the same must be reported to the concerned lender or CIBIL.
  • Taking a loan from an existing lender: If you have a good relationship with the existing lender and have a savings/current account or any investment plan with them, then you can apply for home loan with the same lender as they are already aware of your financial history and thus may provide you with credit at low-interest rates home loan and charges.
  • Broadening the horizons: While most of the banks and NBFCs consider a credit score of 700 as an ideal credit score for providing the home loan, the cut-offs for credit score varies from lender to lender. Thus, borrowers must evaluate all such lending institutions to get a home loan with a bad CIBIL score.

Advantages of Bad Credit Home Loan

Getting a bad credit home loan provides the following benefits to the home loan borrowers.

  • The first advantage of a bad credit home loan is that the borrowers can now get much-needed cash for buying a house.
  • Lenders may also give you the flexibility to repay the home loan with easy EMI instalments or prepay/pre-close the loan in case of a bad credit home loan.
  • Further, paying home loan EMIs on time can help to improve the credit score in the future and thus avail credit at lower interest rates.

Disadvantages of Bad Cibil Home Loan

  • The most significant disadvantage of availing a bad CIBIL home loan is that the lenders provide such loans at high-interest rates.
  • Along with that, various other charges associated with home loans such as processing fees, legal costs may also be high in a bad CIBIL home loan.
  • Nevertheless, the only alternative is to avail a home loan later once you have a good credit score.

Points to Remember While Applying for Home Loan with Poor Credit Score

It is thus essential to remember the few points while applying for a home loan with a poor credit score.

  • Before availing a bad credit home loan borrowers must remember that they may have to pay higher costs on their loan due to high-interest rates and charges.
  • Failing to make payments on time can further impact the credit score negatively, which might make it difficult to avail a loan in the future.
  • Borrowers must ensure that EMIs are paid on time, and there are adequate funds in the bank accounts.
  • Opting for the auto-debit facility can help to pay the monthly EMI payments regularly.


How can I buy a house with bad credit and no money down?

To apply for a home loan with bad credit down, follow the tips as mentioned below:

  • Clear Previous Debts
  • Take a Joint Home Loan
  • Negotiate with lender
  • Apply for a home loan with an existing lender.
  • Look for a home loan from NBFCs

How can I qualify for a home loan with bad credit?

You can get a home loan with bad credit if you apply for a joint home loan, in case the co-applicant has a higher credit score. Also, you can apply for a home loan with a lender with whom you have a good relationship and are aware of your financial history. Finally, there are several Non-Banking Financial Institutions that provide home loans with bad credit.

What loan can I qualify for with bad credit?

While a loan against gold does not require any CIBIL score for approval of loan application, you can also qualify for a home loan which requires a good credit score. However, to get a home loan with bad credit, you must either apply for a joint home loan or with an existing lender who is aware of your credit history. Also, you can compare home loan rates of Non-Banking Financial Institutions as they may provide home loans with bad credit.

Can I get a loan with a 500 credit score?

While a home loan requires a credit score of 650 or above, you can still get a home loan with 500 credit score by making a sizeable down payment. If you don’t have enough savings for down-payment, you can apply for a home loan jointly with someone who has a good credit score. It helps to increase your home loan eligibility. Also, if you have not cleared any previous debts, you can negotiate with your lender to get a no-objection certificate by clearing off the debts.

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*Terms and conditions apply. Credit at sole discretion of lender, which is subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and collected from public sources. Read More
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