When you have applied for a loan from a bank or any financial institution credit score is required. Bank and financial institutions check your credit score. If you do not have a good credit score your loan application may be rejected or you have to pay more interest if your loan passed. A credit score is not only required for a home loan but also it is very important even during the full repayment period. Now the rate of interest is in the lower stage, but it may be changed depending upon gender, loan to value ( LTV) credit score of the borrower. Home loan interest rates may vary in changes of credit score.
How Interest rate calculated?
In general, due to the impact of credit score, there is a difference between banks. Each Bank has its own approach to credit score, resulting in a difference in Interest rate. If your credit score is more than 800 points and your home loan amount is below 30 lakh bank can put a 6.70% rate of interest per annum, similarly if the home loan amount is more than 1 crore bank can put a rate of interest 6.50% per annum. So, there is a difference in the rate of interest for a certain credit score. In general, the rate of interest will be higher if you have a low credit score.
Impact of bad credit score on the existing borrower
If you have already taken a home loan your rate on interest may be increased in the fall of your credit score. Suppose when you have taken a home loan your credit score was 800, and the rate of interest was given to you 6.70% per annum. Later if your credit score decreases to 700 points bank will increase your rate of interest to 7% per annum. The rate of interest will be changed in the range of the credit score. Bank review your credit score once a year according to this review bank fix your rate of interest. If during the review period your credit score decreases the rate of interest will be an increase on an existing home loan. Similarly, if credit scores increase the existing rate of interest will decrease. The rate of interest will same if there are no changes in credit score during the review period. we should maintain a good credit score to get a lower rate of interest home loan. A credit score is very much important for a loan.