Loan Settlement: It is a little difficult to get credit after loan settlement. In such a situation, if you need a home loan to buy a house, you may have to wait for a while. But why is it so?
If you want to buy your dream house soon, but have recently done loan settlement, then your dream may be a little further away. Actually, it is a bit difficult to get credit after loan settlement. In such a situation, if you need a home loan to buy a house, you may have to wait for a while. But why is it so? And after how many days of loan settlement can you take a home loan to buy a house, is there any such provision? Let us understand in detail.
What is loan settlement?
If you have taken a loan and for some reason you cannot repay it as per the original terms and conditions. So you ask your bank or lender to give you an option. Your bank will give you the option to make a one-time payment to settle your loan account. This amount should be less than the outstanding payment you have, i.e. the amount of loan you have to repay. You can repay your loan by paying this amount. This loan account of yours will be shown as ‘Settled Debt’. Please note, this is not a closed account, it is a settled account.
The tag of your settled loan can remain in your CIBIL credit report for the next seven years. In these years, whenever you apply for a loan, credit card or any other means of loan, the lender will take the decision on loan approval only after keeping in mind the status of your loan settlement.
Can you buy a house with a settled loan?
See, if there is a settled loan tag in your report, it does not mean that you will not get the loan at all. Yes, you will not get it on your terms, you will get it with difficulty. But there are some other factors also, by which you can determine whether you will get the loan or not and after how much time you can get it. For example, there will be some conditions or requirements from the bank, which you will have to fulfill, if you fulfill them then you can decide to buy a house.
1. Credit Rating/Score
To take a home loan, your credit score should be above 650. First of all your credit rating will be checked. Since debt settlement can spoil your report, you will have to improve it first.
2. Debt-to-income Ratio
The bank will also see what your total monthly income is, and how much of it is going towards repaying the loan. To get approval for the loan, your DTI should be less than 36 percent.
3. Job/Employment
For home loan, banks definitely see what is the source of your income and how stable it is. Generally it is seen that you have been working for at least two years.
