Loan interest rates are rising, but a good CIBIL score can still get you a better deal

Loan interest rates are rising, but a good CIBIL score can still get you a better deal

Since the Reserve Bank raised the repo rate last month and gave signals of further upward revisions, lenders such as SBI, HDFC, PNB and ICICI Bank have raised interest rates . The State Bank of India (SBI) has raised its interest rates on home loans effective June 1, 2022. The bank has raised the External Benchmark Lending Rate (EBLR) by 40 basis points to 7.05% plus the credit risk premium (CRP) and the Repo rate-linked lending rate (RLLR) increased to 6.65% plus the CRP. On ordinary home loans, SBI interest rates range from 7.05% to a maximum of 7.35%.

The private sector HDFC’s Retail Prime Lending Rate (RPLR), on which its adjustable rate home loans (ARHL) are benchmarked, increased by 5 basis points, effective June 1. With this 5 basis point increase, the total interest rate hike will be 40 basis points for HDFC home loan borrowers. A basis point is one hundredth of a percentage point.

ICICI Bank and Punjab National Bank (PNB) also announced hikes in their marginal cost-based lending rates (MCLR). PNB, a public bank, raised its marginal cost of funds-based lending rate by 15 basis points. The increased rates come into effect on June 1, according to the PNB website.

Private sector lender ICICI Bank has also revised the marginal cost of funds-based lending rate with effect from June 1, 2022, according to its website. The state-run Bank of India has also increased the marginal cost of funds-based lending rate over a term with effect from June 1, 2022.

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A good CIBIL score can lower forward-looking interest rates:
The CIBIL score is one of the key factors considered by banks and financial institutions when offering loans. Having a higher CIBIL score not only qualifies you for a loan, but also helps you get it at a lower interest rate. According to the CIBIL score, the premiums on bank-quoted interest rates vary between 5 and 50 basis points for home, auto and personal loans.

In the case of SBI, under regular home loans, for a credit score greater than or equal to 800, the interest rate will be the lowest at 7.05% with a maximum gain of 7.45%. Between 750 and 799 credit scores, the interest rate is 7.15%, while on credit scores 700 to 749, the interest rate is 7.25%. For credit scores 650 to 699, the interest rate will be 7.35%, while for credit scores 550 to 649, the rate is 7.55%. For the NTC/non-CIBIL score, the interest rate is 7.25%. With the exception of a CIBIL score greater than or equal to 800, the maximum payout for regular home loans is the same as the interest rate.

The lower your credit score, the higher the interest rate charged on your home loans and vice versa. In particular, the CIBIL score gives a view of how a borrower manages their credit, while showing the ability of borrowers to take out loans and repay them.

Bernadine J. Perkins