How to qualify for refinance ?

First learn what's refinancing means? Refinancing is basically replacing one debt with another debt obligation under better terms.With interest rates going low, many individuals think of going for buying a home, vehicle, investments or refinancing a mortgage. But it is always the worry of the consumer on whether his loan or refinance will get accepted, with the lending standards now increasing day by day. So what factors are needed to qualify for a refinance?

Before applying for a refinance, make sure that your corporate credit health is in good financial situation. If you don’t have enough financial strength to refinance, then going through the application process is a waste of time. Different credit institutions have different criteria to qualify for a refinance, but following are the general factors needed to qualify:

Value of the equity:
Lenders mostly require consumers to have equity in their homes, other properties etc. The home-owners value of the property should be more than what he needs for the refinancing of his loan.

Credit score:
The mortgage lenders would take in account your credit score, making note if your mortgage payments have been on time. Your credit score shows the credit worthiness of an individual helping the lender make a decision about whether to accept your application.

Debt-to-income ratio(DTI):
DTI is the total debts to be paid as a percentage of the gross income. The lenders take into account your DTI ratio and a low DTI ratio is needed to qualify for a refinance. If you debts form a large part of your income, the lender sees you as a risk as you may not be able to pay back the refinance loan.
The other factors which are seen while evaluating your application is your income, savings and there also may be some additional factors for some other banks.

Get in with us for detailed guidance @ www.cibilconsultants.com

Source: Secondary

How does defaulting affect your CIBIL Score?

A loan default is basically not making the required payments on your loan to the lender. A loan default is associated with a lot of financial problems. Even if you met all the conditions of the default, your credit score will drop and you will find it hard to get another loan in the future.

There can be many reasons why an individual may have done his payments, but when a certain time passes without you making the payment, it becomes a part of your credit history and would be included in determining your credit score. When this default is added to your credit history, it stays there for 7 years thereby affecting your credit score for a long time. Therefore, it is important that your avoid turning your late payments into defaults, to not hurt your credit score.

Default can occur with all types of loan. Default in loans like home loans, auto loans can have the lender take repossession of your home or vehicle. 

Default is not the same as deferment, in deferment the payment is postponed mutually after an agreement with the lender while in default there is no agreement that you will get your payments even in the future. Default indicates to the lender that there is far more and deeper problem in the individual’s finances.

If you cannot avoid a default, you can at least reduce the impact of it. The best way to reduce a default is to contact the creditor as soon as you can. If you are late with only a few payments, you can work out some way with your lender for a payment plan. You can also consider various options for refinancing. If you can before declaring on your default, you could sell your car or house on your own or repay the lender than going to a agent. This saves the lender time and money as it is more cost-effective way.

If your debt problems are much deeper than you thought, contact our credit repairing agency at www.cibilconsultants.com , which can help you restructure your payment plans.

Source: Secondary