If you are looking for an affordable home loan interest rate in India, then you must take care of your credit or CIBIL score. It is one of the first among several other factors that a lender takes into account before sanctioning the loan. Read on to know how you can avail of a home loan at the best interest by keeping your credit score on track.
What is a Credit or CIBIL Score?
A credit score is a 3-digit figure that represents the applicant’s creditworthiness when taking a loan. In simple words, it helps the lender to determine how reliable and capable one is of repaying the full amount in due time. The score ranges from 300 to 900. The higher the score, the better are your chances of getting lowest interest rates on home loan. Most lenders consider a score of 725 and above desirable, so you must ensure you maintain a good score.
Why is it important to maintain a high CIBIL score for home loan?
Maintaining good credit habits can help you save big. When taking a loan, your credit profile plays a vital loan in deciding the rate of interest. Most banks and lending institutions categorize borrowers depending on their CIBIL score and accordingly charge different credit-risk premiums. This is because borrowers with a good score have a better probability of making timely loan repayments. Thus, with most lending institutions and banks opting to price the loans based on risk profile, creditworthy applicants can enjoy low credit-risk premiums.
How to Keep Your Credit Score on Track
Your credit score changes depending on your borrowing and loan repayment history. Thus, the interest rate offered is also likely to change over time. If you wish to maintain a low rate of interest, then you will have to ensure that your credit score does not fall considerably during the home loan tenor. Here are some tips to maintain a decent CIBIL score:
- Make timely payments for all availed credit – be it a retail loan or a credit card loan
- Maintain a healthy debt-to-income ratio
- Avoid applying for credit from multiple lenders simultaneously
- Customize your credit limit
- Opt for a longer loan tenor
- Check your credit score thoroughly for any errors and get them rectified
- Choose different forms of credit
Home Loan Interest Rate in India
In India, you can opt for either a fixed rate of interest or floating rate of interest on home loans. A fixed interest rate remains the same throughout the loan tenor i.e. any change in the market trend will not affect your rates and so EMI remains the same. A floating rate, however, keeps fluctuating with changes over time. The revised rate is then adjusted with your payable EMIs.
One added benefit of choosing a floating rate is that as per the guidelines of the Reserve Bank of India (RBI), you will not have to pay any extra charges or fees for foreclosing the loan before the end of the tenor.
Regardless of the type of interest you choose, discuss the loan terms with your lender to stay clear. You may also make use of an EMI calculator to estimate your home loan monthly instalments.
How to Use a Home Loan Calculator
A home loan calculator is a beneficial tool, as it helps you get an accurate estimation of the monthly EMIs. To use it, you will simply have to visit the lender’s portal and access the online ‘Home Loan EMI Calculator’. Next, enter your principal amount, number of years for which you have taken the loan, and the rate of interest. Once you fill in these details and click on the ‘Get Estimate’ button, your monthly EMIs will be instantly displayed on screen.
The home loan EMI calculator is extremely user-friendly, accurate and fast.
How to Find Out Home Loan Eligibility Criteria
Before sending out a loan application, find out if you qualify for the same. Knowing your home loan eligibility criteria will get the job done easier. Usually, the lender requires the applicant to meet the following parameters:
- Must be at least 23 years of age and not beyond 62 years of age
- Must be a citizen of India
- Must have at least 3 years of experience working as a professional and having a steady source of income
This ensures that your loan application is not rejected and all the paperwork is done smoothly.
How to Apply for Home Loan
The easiest and fastest way to get a house loan is to send out an online application. This involves the following steps:
- Visit the lender’s official website
- Access the online application form
- Enter your personal, employment and financial details (KYC documents, salary etc.)
- Submit the form along with relevant documents and await verification from the lender’s end
- Once all documents and information are verified, wait for the lender to sanction the loan and initiate processing
The entire process is quite fast and straightforward. Note that the disbursement of loan may take 3-4 working days.
Home loans are a great way to fulfil your dream of a perfect home without having to deplete your hard-earned money. Such loans are affordable and easy to repay considering the tenor is typically long and flexible. Furthermore, having a good credit score guarantees the lowest and most competitive home loan interest rate in India.