Buying your own house is one of the major financial decisions. You consider multiple aspects before borrowing the funds for long terms, like 15-20 years. The loan processing involves multiple due diligence before the fund is finally disbursed to the borrower.
When you decide to buy a house, the first thing that comes to your mind is money. How will you arrange the funds? Some people have self-funding, while others take the option of borrowing from financial institutions such as banks and housing finance companies.
Home loan interest rate is very important in the loan processing journey. It decides your future repayments and tenure within which you will pay off the entire loan without delay and default. Almost everyone expects to borrow at a lower interest rate, but it is not possible. Multiple factors come in handy when you take a home loan.
Your credit score is very important, as some banks offer lucrative interest rates to customers with higher credit scores. The interest rates may vary from lender to lender, but often higher credit score works in borrowers’ favour.
A lower rate is important, as even a .5% interest difference can offer you great savings when you start repaying your loan. People must check their credit scores when searching for a home loan. They should know which lender offers the lowest interest rates to customers with higher credit scores of 750 and above.
Your credit score can increase or decrease depending on your financial habits. Maintaining a healthy credit score is important to ensure quick access to funds from financial institutions. If your credit score is not good enough to borrow large loans like a home loan, it makes sense to follow financial discipline and improve your credit score.
You must pay your bills on time and avoid delays and defaults in repayments towards your current loans. Find out the reasons for a lower score and see how you can improve to get the best deal when you borrow a home loan. One more strategy to borrow in lucrative deals is to borrow jointly. If one person has a poor credit score and another has a high one, the bank can consider offering you the home loan you want. You can also borrow a higher amount jointly as compared to individually.
Some banks offer home loans based on your credit score. It helps you borrow at a lower interest rate from banks and other financial institutions. Banks offer good deals to people with higher credit scores considering the risk factor. People with higher credit scores are often treated as low-risk accounts, with lower chances of defaulting or delaying loans. That is why a good credit score is always considered an advantage.
The table below compares the home loan interest rates of some banks and housing finance companies based on credit scores. You can compare and take the decision according to what suits your requirement. Always perform your due diligence and read the terms and conditions of the loan agreement before the final decision.
Home loan interest rate corresponding to different levels of credit score
Note: The Table consists of home loan interest rate data of banks and NBFCs that shows their home loan rate linked to credit score on their website. Interest rate is indicative and in actual situation the rate may vary depending on various factors and bank’s T&C. Data as on 06 Sep 2022.
Compiled by Bankbazaar.com