Interest Rates Levied on Home Loan Now to Be Based on Your Credit Score

The recent implication of new rules and regulations in the real estate market have been so progressive and forward moving in nature which has brought a lot of positive changes. Out of all the new rules brought into practice one being the credit score rule where now as per the rule EMI payment will rely upon your credit score history. As per the policy the interest you pay on your home loan will be linked to your existing credit score. So better you get with the score lesser the interest needs to be paid. Before it was not so as it was easier to get home loan even with not so good credit history but now the things have changed due to coming up of these new policies where borrower strictly needs to maintain good credit score to get home loan at low interest rate. So in order to achieve better score people will now maintain clean credit history. So there is always a room for everyone to improve the credit score as and when you improve with your credit score interest rates keeps on decreasing as much. This rule will help to solve two objectives at a time where borrower will be benefited for sure but banks too will be benefited. As per the rules borrowers with high credit score will get to pay back the loan amount at low interest and bank will receive timely payment of loan amount.

The whole process work in a way where bank are mandated to provide the customer loan history to credit information bureau of India (CIBIL) and the institutes do the job of maintaining the previous credit records of the borrowers and after analyzing all the data and looking at the entire credit history of the borrower in terms of previous dues and payment clearances CIBIL score is derived. The first bank to come out with the linking of home loan interest rates to the credit score has been Bank of Baroda. Bank takes out the credit score from CIBIL and seeing the score interest is charged. So if the score rages to 760 points and above the rate of interest charged on the loan is 8.35 percent. If the credit score is more than 725 and less than 759 points the rate of interest charged on the loan will be 8.85 percent and if the credit score is less than 724 point then the rate of interest charged on the loan will be 9.35 percent on the home loan. As per the rules the first time borrowers with no credit score will be charged interest on the loan at the rate of 8.85% just to make the policy look more attractive and rewarding to the consumer. The new Interest rates charged on loan are irrespective of loan amount and its tenure.

Bank of Baroda seems to first who came out with this policy charging the lowest interest rates as compared to the other banks like SBI and ICICI banks where their lowest interest rates are 8.65 percent and 8.70 percent respectively. Bank of Baroda does not seem to be maintaining any spread or markup rate they have one year marginal cost lending rate (MCLR) which is same as the floor rate maintained at 8.35 percent for the best customer. Whereas in the case of SBI they have one year MCLR at the rate of 8 percent and 65 basis point markups for home loan. Bank of Baroda seems to be providing home loan at the most effective interest rate currently compared to the other banks.
 
Hence, it’s advisable to all the borrowers to have a clean credit score as this will help them to get the loan at cheap interest rates and even a small difference in the percentage proves to be beneficial at the end and keeping clean score will prove worthy in future as having clean score will help you to get a loan easily if any sudden contingency occurs. At last great credit score will help to strengthen the investment portfolio of the borrower.