First Time Housing Loan – Introduction – Part 1- Financial Discipline

This blog is specific specifically created for the first time housing loan customers.

House or home or residential unit is a very big commitment on part of a buyer, be it emotional or financial.

To buy a house be it buying a plot and constructing a House of dreams on that or a flat or straight away buying a villa/Building needs very high financial commitment. To fulfil that dream common people approach banks or financial institutions to finance the purchase of House or Land. The main purpose of making this blog is educate the common people about what these banks or financial institutions look for before sanctioning a loan.

To fulfil this I will divide this blog into 3 parts.

When a customer approaches a bank with a proposal to buy a building or a flat or a piece of land with construction there on, banks look at the proposal in 3 different angles

1. Financial discipline of the applicant or customers
2. Financial capability of the customer
3. Asset quality

So today we will discuss about what and How banks look into financial discipline of the customers.

Financial discipline here means how the customer or applicant has done all the financial dealings in the past and in the present ,in simple language His/Her Credit History, has he been able to repay already outstanding loans at the correct intervals or he/she have defaulted for any loans in the past, have they been willful defaulters for any of the banks or financial institutions. How many enquiries they have made for the present loan.

Now some customers are existing customers of the Bank of finance institution they have approached ,so those banks can take out their history and analyze the financial discipline of the customer. If the customer have approached a new bank for some benefits like less interest rates less processing fee etc. then the new bank has no credit history of the customers.

Then the bank or the financial institute takes help other credit bureaus like CIBIL, Experion, Transunion etc. These credit bureaus compile all the information from their member banks and financial institutes and record them in their servers. All the member banks and financial institutes then pull up the data from this credit bureaus servers with some specific data of customers like PAN, Adhaar, Mobile number etc. these credit bureaus in turn deliver the credit report of the customer to the banks. These credit reports contain all the data about financial discipline of the customers from all the member banks and financial institutions.

These credit reports are analyzed and helps the banks to decide upon the proposal.

Now many of the common people don’t know about these credit bureaus and unknowingly make financial mistakes ( in view of less score in Credit Bureaus) like

• late payment of EMI’s,
• Non payment of EMI’s,
• Late payment of credit card dues,
• Loan accounts written off or settled,
• more number of enquiries for loans etc,
• taking more loans than income.

These all results in low score in these credit bureaus and finally resulting in rejection of your loan application.

So whenever we’re going to apply for a housing loan we should first analyse our financial discipline. These credit Bureau reports give a lot of data to the banks to analyse the customer like if there are in lot of enquiries for the loan, that will suggest the customer is credit hungry and is not so financially disciplined that other banks have refused loans.

Now this credit Bureau reports are also not 100% correct which has to be checked. When a bank rejects your proposal due to less score in these credit reports, we should analyse the credit report thoroughly. There may be a mistake in the data which these credit reports have pulled in from all the member banks and financial institutions.

The most common mistakes are listed below

• Incorrect personal information (name, mobile number, and PAN number, among others)
• Wrong loan accounts on your name.
• Incorrect credit limit.
• Account status.
• Outstanding payment.
• Payment history.
• Duplicate account.

If you see any of the above in your credit report then then the next step is to approach these credit bureaus and raise a complaint or grievance. These credit bureaus will then investigate the matter and rectify data which was incorrect earlier. This will certainly increase your credit score and banks will also accept the same for your credit proposal.

So with this blog you must have understood how much financial discipline plays a role to determine whether you can take a loan or not.

If you want to know anything more about financial discipline, credit bureaus, credit score you feel free to approach me and I will try to resolve all your doubts regarding the same. If you want me to make a blog specifically on credit bureaus how to rectify your credit score please write to me. I’ll certainly take up that.

Next blog will be on the next important part where banks look upon this financial capability of the customer. Stay tuned.