With the growing competition among the lenders, today, you can easily find a lender that is offering a home loan at a competitive rate. So, if you are an aspiring home buyer and are looking for the best loan scheme, you must know about the various factors that affect home loan.
Credit scoreYour credit score has a significant impact on the interest rate you pay on the home loan. The lenders consider the credit score as a key factor to determine the creditworthiness of the loan applicants. So, if you have a good credit score, it will have a positive impact on the lender in winning their faith on your ability to repay the loan. While a poor score can have an adverse effect. Most lenders consider a credit score of about 650 to 800 as an ideal score. So, if you have a good credit score, you can use it to your advantage to get a discount on the home loan interest rate.
DurationThe loan duration is another important factor that affects the interest rate. The duration is inversely proportional to the interest rate; the longer the duration, higher will be the interest rate and higher overall cost. Experts recommend borrowers to apply loan for a short duration; the lenders generally offer lower interest rate for shorter loan terms. But, this would mean that your EMI would be higher.
The location of the propertyAnother important home loan interest rate factors that affect the overall cost of the loan is the location of the property. For a property located in remote and isolated location where the connectivity and infrastructure are poor, you may have to pay higher interest as compared to a property located in an urban location with good amenities. The same logic applies to the age of the property. If the property is old, the lender may consider it to be risky and charge higher interest.
So, do your research well, choose a new property located in a prime location and apply for a shorter duration to ensure that you get a loan at a lower interest rate.
Learn more about your Home Loan Eligibility here.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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