The interest rates being charged for the home loans may vary according to the lender to lender and also according to the individual as well. The banks may not always charge similar interest rates to the borrowers due to some of the other reasons. Banks charge interest rates that may be in the range of around 7-9% per annum. For example, the interest rates may be starting from 6.90% per annum onwards. The onwards price denotes the starting point for the interest rates being charged for the home loans. The EMI calculator denotes the actual interest amount being payable to the borrower depending upon the interest being charged by the lender. Also according to the tenure, the repayment value varies. The higher the tenure lowers is the interest repayment value on a monthly basis while the actual repayment value would be higher than the shorter tenure-based loans on the same interest rates, as the interest is charged on a cumulative basis to the borrowers. The overall interest rates are falling drastically due to the falling repo rate of RBI. The government is making lending cheaper and interests on fixed deposits are also declining due to lower interest rates on home loans.
The banks check the financial background of the applicant and also check the type of employment, age of the applicant, income of the applicant, and credit score of the applicant. And accordingly, the bank decides the interest rates being charged to the borrower. The different lenders also do have different policies regarding lending and also accordingly they charge the interest rates to the borrowers. The public sector banks and the private banks charge lower interest rates to the borrowers while the cooperative credit societies charge higher interest rates. The NBFC’s charges on interest rates may drastically vary. Like for example, one NBFC may charge interest rates as high as 18-20% while the others may charge as low as 6.50-7% per annum interest rates to the borrowers. Though the interest rates are decided according to the repo rate being fixed by the RBI some lenders continue to charge higher interest rates on unsecured loans being provided to the borrowers. Thus as different banks or NBFC’s have different criteria related to the disbursement of home loans they charge differently to the customers. Also, the processing fees are in the range of 0.25%-1% of the principal amount or else Rs.10,000 whichever is lower.
Reasons for the higher interest rates being charged to the applicants:
- Age of the borrower:
If the age of the borrower is high then in that case the loans charged by the lender may be high as the bank does not wish to extend the loans to the persons who have shorter age for retirement. Thus in that case the bank may ask for higher interest rates on home loans. The ideal age of borrowers bank prefers is in the range of 25-45 years. While as the least preferred are the one’s applicants who have crossed the age of 55 years
- CIBIL score of the borrower:
Some banks have the criteria of 800 points credit score or else some of the banks have a minimum criterion of 700 points of credit score. Thus if the credit score of an individual is below 700 points then in that if the bank approves the loan then they may charge higher interest rates to the borrowers. The bank may on average charge 1-2% higher interest rates to the borrowers.
- Obtaining the loans from the ones who charge higher interest rates:
If the borrower approaches the lender who charges higher interest rates then in that case the borrower may end up paying higher repayment value. The co-operative credit societies or the small finance banks that provide higher interest rates on fixed deposits to their customers tend to charge higher interest rates on lending as well and the same vice-versa for lower interest rates. Thus in that case with some of the banks, interest rates could be higher being charged
- Obtaining un-secured loans:
If the home loans are obtained from such lenders who provide loans without any proper documentation, even with poor CIBIL score or else even the ones who hide income tax or do not have proper source of income. Thus the unsecured loan means the loans are being disbursed on the basis of without proper documentation process or else with an exceptionally poor CIBIL score. The lenders who provide loans to such borrowers are different from the ones who charge lower interest rates and with the ones who require proper criteria to be followed. Very few of the NBFC’s are the ones who provide unsecured loans to the borrowers.
- In the case of mortgage loans:
The home loans can be availed through income proof or else through the mortgage of gold. The gold mortgage loans for the property are being charged at interest rates of 12-24% depending upon the lender. The mortgage loan does not require a good CIBIL score or proper income proof for the disbursement of home loans.
Thus there are multiple reasons why higher interest rates may be charged to the borrower. To avoid paying higher interest rates to the bank the applicant should maintain proper documentation of identity and income proofs, also file the income tax, and also maintain a proper CIBIL score while applying for the loans. If the applicant goes for unsecured loans then the applicant is bound to pay higher interest rates. Also, the loans should be borrowed at the right age to avoid rejection or higher interest rates being charged for the loans.