Home Buyers With Good Credit Scores To Get Cheaper Loans
Gone are the times when banks were eager to lend you money as they targeted faster growth. Lack of diligence on their part is being seen as a key reason in the present banking system crisis. Consequently, financial institutions are launching stricter new lending norms. Borrowers with a poor credit score would now have to pay a price for their lack of creditworthiness. A credit score can be in the range of 300 and 900. A score above 750 is considered good.
Of late, several public sector banks, including Bank of Baroda, Syndicate Bank and Union Bank of India, have made public their plans to offer home loans based on the applicant’s credit score provided by third party credit bureaus in India, including CIBIL. Depending on the applicant’s score, these banks would charge lower rates of interest on the applicant’s home loan.
State Bank of India (SBI) already factors in a customer’s creditworthiness before granting the home loan. However, the bank relies on its internal examination with regards to the risk assessment exercise. While a borrower with a good score can get a home loan from SBI at 8.05 per cent interest now, borrowers with a poor score will have to pay 8.30 percent. The interest would get even higher for a larger home loan.
At Bank of Baroda, a borrower with a credit score between 760 and 900 will be charged 8.1 per cent on new loans. Those with credit scores between 725 and 759 will have to pay 8.35 per cent interest while those with scores between 675 and 724, will have to pay 9.1 per cent interest. The bank won’t entertain any applicants who have a score below 675.
While Union Bank of India is currently offering home loans at 8.45 per cent, a borrower with a credit score lower than 700 will have to pay 10 basis point additional interest, i.e. 8.55 per cent.
It is not only at the time of granting the loan that the banks would watch the borrower’s credit score. In the case of deterioration in creditworthiness of the candidate at a later stage, the bank will impose higher interest rates.