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Maintaining a higher credit score will play a major role in availing of cheaper home loan interest rates. This will bring you closer to your dream house. The largest lender, State Bank of India (SBI) caters to different borrowers with its home loan schemes. Currently, home loans have become a one-stop solution for homebuyers who do not look to use hefty cash or seek easy EMIs that could be paid on monthly basis.

Home loans are flexible, lesser burdensome than the requirement of gathering too much cash, and are also time-based. Further, there are also tax benefits on the repayment of home loans. Not to forget, investing in a house is like investing in an asset that could yield one of the highest appreciation rates ahead.

Earlier this week, SBI through its Twitter account said, "#GoAhead, #GoBig. Get your dream home with SBI Home Loans."

SBI is offering home loan interest rates as low as 6.65%. However, the rates on home loans will depend upon the credit score of the borrower. Women borrowers will be the biggest beneficiary of SBI's home loans.

SBI has launched a credit score-linked home loan interest rate. Also, the rates are floating and linked to the repo rate.

Starting April 1, 2022, SBI offers various types of home loans at interest rates ranging from 6.65% to a maximum of 8.60%. But the biggest beneficiary is from regular home loans.

However, as is mentioned, how much EMI you pay on your home loans will depend upon your credit score.

Here's how your credit score will affect your EMIs at SBI's regular home loans.

CIBIL Score:

Less than or equal to 800 credit score: SBI offers the lowest 6.65% rate on regular home loans on this CIBIL score. The max gain is up to 7.05%.

750-799 credit score: The lender offers a 6.75% rate as a term loan, while the max gain is up to 7.15%.

700-749 credit score: The regular home loan rate here begins at 6.85%, while the max gain is 7.25%.

650-699 credit score: The bank gives 6.95% as the term loan, with a max gain of 7.35%.

550-649 credit score: The bank gives a 7.15% interest rate on regular home loans while the max gain is 7.35%.

No CIBIL score: Then the regular home loan rates will be at 6.85% at SBI, while the max gain is at 7.25%.

From the above, it can be said that a higher credit score gives better chances of the lowest home loan interest rates and hence cheaper EMIs.

There are many benefits that SBI also offers on its home loans.

Firstly, the bank gives 5 basis points concession to women borrowers subject to a maximum EBR, of 6.65%.

Secondly, the bank gives a premium of 10 basis points to card rate for loans up to 30 lakh for LTV > 80% and <=90%.

Thirdly, top-up loans are not permitted under the overdraft category for loans below 20 lakhs and above 2 crore. Also, the interest rate on a top-up loan should not be below the interest rate charges under the underlying home loan.

SBI offers 7.05% to 7.65% rates on top-up home loans, while overdraft rates in this category range from 7.35-7.95%.

Further, it needs to be noted that the max gain facility is available only on 'ready to move-in' properties.

Also, there is a 5 basis points concession offered under the Privilege & Shaurya HL & Apon Ghar HL if the salary account is maintained with SBI under the salary package.

Repo rate linked loans:

In simple terms, loans linked to repo rate mean that every RBI decision on the policy repo rate of India will have an impact on home buyers' cost of borrowing.

If the policy repo rate is hiked then it could lead to a rise in home loan interest rates or vice versa. However, it depends on banks to whether pass on the change of policy repo rate to borrowers. Also, there is a possibility that banks do not necessarily revise lending rates in the exact quantum of change in repo rate.

Repo rate can be referred to as the ‘repurchasing option’ or 'interest rate' that a bank has to pay for availing credit from the central bank. Just like borrowers who have to pay interest to banks on their loan amount, the same way banks also pay interest rates to RBI for availing funds. Banks park their treasury bills or gold to the central bank for availing overnight credit during the time of liquidity shortfall.

In the first bi-monthly monetary policy, RBI kept the repo rate unchanged at 4% for the 11th time in a row. The MPC also decided to remain accommodative while focusing on withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.

ICRA in its research note for April 2022 monetary policy, said, "We continue to expect the stance change to be followed by a shallow rate hike cycle, with the repo rate being increased by 25 bps each in August and September 2022. The 10-year G-sec yield breached 7.1% after the policy announcement. We anticipate it to rise to as much as 7.4% during H1 FY2023, as the market's views on the number and timing of rate hikes crystallize."

What is a credit score?

The credit score is critical for loan approvals. They are three-digit scoreboard that provides a clear view of a borrowers' health in terms of credits.

The CIBIL score gives a view of how well a borrower manages his or her credit. Also, this gives a clear understanding of the ability of the borrowers to opt for loans.

Simply, a credit score helps in understanding whether you are a reliable borrower or a risky one and banks accordingly sanction loans to these borrowers.

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