Buying your own home is one of the biggest financial decisions. You consider several aspects before borrowing the funds for the long term, such as 15 to 20 years. Loan processing involves several due diligences before the fund is finally released to the borrower.
When you decide to buy a house, the first thing that comes to mind is money. How will you organize the funds? Some people are self-financing, while others choose to borrow from financial institutions such as banks and housing finance companies.
The home loan interest rate is very important in the loan processing process. It decides your future repayments and how long you will repay the entire loan without delay or default. Almost everyone expects to borrow at a lower interest rate, but it is not possible. Several factors are useful when taking out a home loan.
Your credit score is very important as some banks offer lucrative interest rates to customers with higher credit scores. Interest rates can vary from lender to lender, but often a higher credit score works in favor of borrowers.
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A lower rate is important because even a 0.5% interest difference can save you a lot of money when you start paying off your loan. People should check their credit scores when looking for a home loan. They need to know which lender offers the lowest interest rates to customers with credit scores of 750 or higher.
Your credit score can go up or down depending on your financial habits. Maintaining a good credit rating is important to ensure quick access to funds from financial institutions. If your credit score isn’t good enough to take out big loans like a home loan, it makes sense to follow financial discipline and improve your credit score.
You need to pay your bills on time and avoid delays and defaults on your outstanding loans. Find out the reasons for a lower score and see how you can improve to get the best deal when borrowing a home loan. Another strategy for borrowing in money-making transactions is to borrow jointly. If one person has a poor credit score and another has a high score, the bank may consider offering you the home loan you want. You can also borrow a higher amount jointly compared to individually.
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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 ratings are often treated as low-risk accounts, with less chance of default or loan arrears. This is why a good credit score is always considered an advantage.
The table below compares home loan interest rates from selected banks and housing finance companies based on credit ratings. You can compare and make the decision based on what suits your needs. Always do your due diligence and read the terms and conditions of the loan agreement before making the final decision.
Home loan interest rates corresponding to different levels of credit rating
Note: The table consists of home loan interest rate data from banks and NBFCs which show their home loan rate linked to credit score on their website. The interest rate is indicative and in the actual situation, the rate may vary depending on various factors and the general conditions of the bank. Data as of September 06, 2022.
Compiled by Bankbazaar.com