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Aligning its rate with the competition, LIC Housing Finance recently reduced its home loan interest rates. The housing finance company now offers its lowest rate at 6.66%. Earlier, the lowest interest rate was 6.9%.

The company is now among the lenders that offer the most competitive interest rates on home loans. Kotak Mahindra Bank and Punjab & Sind Bank offer home loans at 6.65%.

While interest rates on home loans are now very competitive, here are five reasons why you may not get the lowest rates.

1. The best interest rates are meant for customers with a higher credit score. For each lender, the credit score criteria differ. For some, it can be above 750, and for some, it can be above 800. If you don’t have the required credit score, you will not get the lowest rates. Instead, the bank will levy a risk premium on the lowest rate to give you a home loan.

2. For some banks, the lowest rates are for salaried women. For men, they may charge an additional 5-10 basis points over the cheapest rates they offer. One basis point is one-hundredth of a percentage point.

3. Some banks offer the lowest rate for loans up to 30 lakh. For higher amounts, the bank may charge higher interest rates.

4. Most banks have a list of preferred employers. If your employer is not on the list, the bank may charge a higher interest. The lowest rates, typically, are meant for salaried customers. For business owners, a lender may have different rates.

5. There are also some other parameters due to which a lender can charge higher interest rates. Some of these include the borrower’s age and education qualification and the age of the property. The younger you are, the better rates a lender would offer you. Also, if the home you are purchasing is old, a lender may not only charge a higher interest rate but can reject your loan application.

(Do you have personal finance queries? Send them to mintmoney@livemint.com and get them answered by industry experts)

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