Have You Been a Good Borrower? Time To Reap Benefits Is Here
Scam-hit banking industry is under a great deal of pressure to get back on track. High-profile cases of fraud and cheating have forced banks to adopt a much stricter approach in loan sanctions. So when you go to apply for a home loan, do not go expecting the process would be done “in minutes” as they projected in advertisements before. However, if you have been a good borrower all your life, you have nothing to worry. In fact, this is the time when you are going to be rewarded as a home loan borrower if you paid all your bills on time, utility or others, showing great diligence. Call it the carrot-and-the-stick approach. Banks are now tying up with information bureaus and government agencies to gauge how diligent a borrower you have been in the past, and are going to reward you for that. Earlier they decided whether to lend you or not depending on your credit score. Now, your credit score may also be instrumental in deciding the rate at which you will be offered the loan.
For the uninitiated, credit score ranges between 300 and 900. While a credit score between 300 and 600 is considered a risky proposition by banks, a score above 700 is considered no-risk zone.
Last year, Bank of Baroda (BoB) launched a scheme under which it promised to offer borrowers with a good credit score lower interest rates. That was the start of a trend. Now, Bank of India (BoI) has announced it would offer preferential pricing to borrowers with a Cibil score of 760 and above. You have a credit score of 760 and applying for a loan amount of Rs 30 lakh, BoI is going to offer you the home loan which is 10 basis points (bps) cheaper than the rate that would be offered to you if you had a lower credit score.
Similarly, IDBI Bank would also will give you cheaper loan rates—a difference between five and 15 basis points—if you have a credit score of 700 and above. The bank recently increased its one-year marginal cost of funds-based lending rates (MCLR) to 8.65 per cent. On the other hand, Bank of India's one-year MCLR stands at 8.40 per cent.
Also read: 5 Must Know Facts About Your Credit Report