How IMGC’s Default Cover Can Help You Secure a Higher Home Loan with Lower Interest
Securing a home loan for purchasing a property can be challenging, especially when your income, credit history, or the property’s risk factors don’t meet a bank’s standards.
Buying a home is a significant financial decision that involves a large sum of money. Most people opt for home loans to help finance their property purchase, but securing a large loan amount from banks can be difficult.
This is especially true for individuals with lower incomes, poor credit histories, or those living in areas with high property risks. However, IMGC’s (India Mortgage Guarantee Corporation) Default Cover offers a solution, allowing you to obtain additional loan amounts with lower interest rates.
What is IMGC Default Cover?
IMGC’s Default Cover helps borrowers secure home loans that they might otherwise struggle to obtain. For those with low incomes, poor credit scores, or self-employed individuals, banks are often reluctant to offer the full loan amount. IMGC’s Default Cover reduces the risk for the bank by guaranteeing the loan, making it easier for borrowers to get approved for a higher loan amount with better terms.
Benefits of IMGC Default Cover
- Securing Higher Loan Amounts: Sometimes, the loan amount requested exceeds the bank’s standard limit. IMGC helps bridge this gap, allowing borrowers to access higher loan amounts than what would be approved without the cover. For instance, if a bank approves only a portion of the loan amount requested, IMGC’s Default Cover can help secure the remaining amount.
- Better Loan Terms for Low-Income Borrowers: For individuals with low or irregular incomes, IMGC can help secure loans that are typically hard to come by. The Default Cover ensures that the borrower is still eligible for a home loan, even if their credit score or income falls below the usual threshold required by traditional lenders.
- Enabling Home Purchase in Risky Locations: Banks are often hesitant to offer loans for properties in less developed or high-risk areas. With IMGC’s Default Cover, borrowers can overcome these obstacles and secure loans even for properties in such areas, reducing the risk for the bank and increasing loan eligibility.
How Does IMGC Default Cover Work?
IMGC works in collaboration with banks to offer home loan guarantees under specific regulatory frameworks. For example, if you are purchasing a house worth ₹60 lakh, the bank might typically approve only 80% of the property value (₹48 lakh). With IMGC’s Default Cover, you could access the remaining ₹8 lakh, bridging the gap and enabling you to complete your home purchase without taking out additional loans at higher interest rates.
Eligibility for IMGC’s Default Cover:
IMGC’s Default Cover is beneficial for individuals who do not meet the traditional criteria for home loans. Whether you’re a first-time homebuyer, a self-employed professional, or someone with a less-than-perfect credit score, the cover helps ensure that you can still obtain a home loan. The cover is available for both salaried and self-employed individuals, and can even help secure loans for those with unstable credit histories.
Working with Banks:
IMGC collaborates with over 20 financial institutions, including leading banks such as SBI, to offer Default Cover for home loan applicants. These partnerships allow for more flexible loan terms, ensuring that borrowers are not limited by their income or credit score. SBI, for example, introduced the Default Cover scheme in 2018, focusing on individuals with non-traditional sources of income or those facing difficulties securing home loans through conventional means.
Fees and Charges:
While IMGC’s Default Cover provides significant benefits, it does come with a fee. Typically, the fee is around ₹10-12 for every ₹1 lakh of the loan amount. For example, on a ₹40 lakh loan, the fee could range from ₹400-480, depending on the bank and the loan terms. This fee is paid upfront at the time of loan disbursement, and it is generally considered a one-time cost.
Interest Rates:
In addition to the one-time fee, borrowers may face slightly higher interest rates on loans covered by IMGC’s Default Cover. Banks typically charge an extra 25-50 basis points (bps) on the loan interest rate for borrowers availing of this cover. However, this additional cost is usually offset by the ability to secure a higher loan amount with better terms, making it an attractive option for many.
In Case of Default:
If a borrower defaults on their loan, the responsibility largely rests with the bank that provided the loan. IMGC only guarantees the loan and helps cover part of the risk for the bank. The bank retains the right to auction the property or take other actions to recover the loan amount. IMGC does not take possession of the property, and the responsibility for repayment remains with the borrower and the bank.
Conclusion:
IMGC’s Default Cover is a valuable tool for homebuyers who may face difficulties securing a home loan due to income, credit score, or property risks. By reducing the risk for the bank, IMGC helps individuals access higher loan amounts, secure better terms, and ultimately achieve their dream of homeownership. If you’re struggling to get the home loan you need, IMGC’s Default Cover could be the solution that makes a difference.
