- What is the Role of Credit Score in different types of Loans?
- Read here how does it affect various aspects of Personal Loans, Home Loans and Car Loans
The need for funds can arise anytime for different purposes. Someone might want to buy a home or a car or the newly launched smartphone in the market or something else. For different types of needs, there are different kinds of loans (both secured and unsecured) that individuals opt for, such as Personal Loans, Home Loans, Car Loans, etc. But there is one thing that is considered as the most important thing when you opt for a loan – Credit Score. Now, if you don’t know about what this score is, let us tell you this a 3-digit score (usually ranging from 300 to 900) indicating your repayment behavior and creditworthiness.
Before giving any kind of loan, and mainly unsecured loans, lenders check the applicant’s credit score and then decide, whether the loan amount should be given or not and also, at what interest rates the loan should be given. So, your credit score plays a huge role in determining your eligibility and also, interest rates. So, we will be telling you about the importance of credit score in mainly three types of loans that are most popular among customers – Personal Loans, Home Loans and Car Loans. To know more about it, keep reading.
Importance of Credit Score in Personal Loans
One of the most popular types of loans among customers is the Personal Loan as it helps them in fulfilling both their short-term and long-term financial needs. An individual can get the required loan amount without pledging any security against it. That’s why the importance of a Credit Score is much higher than other kinds of loans as lenders face a high credit risk while providing the required loan amount. Through credit score, lenders estimate the creditworthiness of an individual.
The eligible credit score tends to change from one lender to another. Usually, a credit score of 700 or more is considered to be a good one by lenders. But a score of 750 and above makes approval more of a formality. When an individual has a high credit score, the lender faces a less credit risk as compared to when it disburses to individuals with low credit scores.
When you have a high credit score, the lender takes very little time in approving your loan application. And the faster processing will automatically help you in getting the required loan amount in your account. When we talk about the loan amount, the lender tends to give a higher loan amount if you have a high credit score as it shows you will be able to repay the loan amount responsibly. Similarly, if you have a low credit score, lenders will hesitate in providing you a higher loan amount due to your repayment history. However, the eventual loan amount will also be based on your income and repayment potential.
Your credit score also plays a huge role in determining your personal loan interest rates. The chances of getting a lower interest rate are higher if you have a high credit score and vice versa. Also, you can negotiate with your lender to reduce it further. On the other hand, Individuals with low credit scores often get higher interest rates on personal loans.
Importance of Credit Score in Home Loans
Home loans are taken by individuals to purchase their dream home. A home loan is considered to be a secured loan as your home will act as the security against the loan amount. But before providing you the loan amount, lenders check your credit score to see how well you can handle the debt via your past repayment track. A high credit score will automatically indicate that you will be able to handle the home loan and this will also encourage lenders.
But the most important thing that your credit score will decide is your Home Loan Interest Rate. Lenders decide the interest rates for individuals based on their credit score. Home Loan Interest rates also tend to change according to the required home loan amount. Individuals with high credit scores can get low-interest rates as compared to individuals with low credit scores. Other than this, if an individual wants to opt for the Home Loan Balance Transfer facility, an individual needs to have a good credit score otherwise it would not be possible to opt for this facility.
We are providing home loan interest rates of some of the top lenders so that you can understand how credit score affects your interest rates. Please check the below-mentioned tables.
HDFC Ltd Home Loan Interest Rates
HDFC Limited, the leading mortgage provider in India, offers Home Loans at an interest rate of 6.95% per annum to individuals with a credit score of 780 or above. This rate of interest is irrespective of the loan amount and profession. However, the general HDFC Home Loan Interest rates range from 8.60% - 9.60% per annum.
LIC Housing Finance Home Loan Interest Rates
LIC Housing Finance offers home loans at different rates to salaried and self-employed based on the credit score they have. Let’s check out their rates.
For Salaried & Professionals and Non-Salaried & Non Professionals
|Loan Quantum (In INR)||CIBIL Score||Salaried & Professionals||Non-Salaried & Non Professionals|
|Up to 2 Crore||>=700||6.66%||6.76%|
|Above 2 Crore to 3 Crore||>=700||7.10%||7.20%|
|Above 3 Crore to 15 Crore||>=700||7.20%||7.30%|
For Salaried & Professionals and Non-Salaried & Non Professionals Whose CIBIL Score is Zero and Less
|Loan Quantum (In INR)||Salaried & Professionals||Non-Salaried & Non Professionals|
|Upto 50 Lakh||7.40%||7.50%|
PNB Housing Finance Home Loan Interest Rates
One of the leading housing finance companies, PNBHFL also provides home loan interest rates according to the Credit Score of the individual. You can see the importance of credit score in a home loan across all loan amounts in the below table.
|Credit Score||Normal Home Loans||“UNNATI” Home Loans|
|Salaried/Self-employed Professionals||Self-employed||Salaried/Self-employed Professionals||Self-employed|
Home Loans/NRPL under Unnati Program
|NTC CIBIL >=170||9.45% for Loan Amount Up to INR 35 lakh|
9.65% for Loan Amount Above INR 35 Lakh
|9.80% for Loan Amount Up to INR 35 Lakh|
10.00% for Loan Amount Above INR 35 Lakh
|NTC CIBIL <170||10.15% for Loan Amount Up to INR 35 Lakh|
10.35% for Loan Amount of More Than INR 35 Lakh
|10.45% for Loan Amount Up to INR 35 Lakh|
10.70% for Loan Amount of More Than INR 35 Lakh
|Upto 650||10.10% for Loan Amount Up to INR 35 Lakh|
10.30% for Loan Amount of More Than INR 35 Lakh
|10.45% for Loan Amount Up to INR 35 Lakh|
10.65% for Loan Amount of More Than INR 35 Lakh
|>650 to < 700||9.90% for Loan Amount Up to INR 35 Lakh|
10.10% for Loan Amount of More Than INR 35 Lakh
|10.25% for Loan Amount Up to INR 35 Lakh|
10.45% for Loan Amount of More Than INR 35 Lakh
|>700 to <725||8.80% for Loan Amount Up to INR 35 Lakh|
9.00% for Loan Amount of More Than INR 35 Lakh
|9.15% for Loan Amount Up to INR 35 Lakh|
9.35% for Loan Amount of More Than INR 35 Lakh
|>725 to < 750||8.50% for Loan Amount Up to INR 35 Lakh|
8.65% for Loan Amount of More Than INR 35 Lakh
|8.85% for Loan Amount Up to INR 35 Lakh|
8.90% for Loan Amount of More Than INR 35 Lakh
|>750 to <775||8.20% for Loan Amount Up to INR 35 Lakh|
8.30% for Loan Amount of More Than INR 35 Lakh
|8.40% for Loan Amount Up to INR 35 Lakh|
8.75% for Loan Amount of More Than INR 35 Lakh
|>775 to 799||8.05% for Loan Amount Up to INR 35 Lakh|
8.15% for Loan Amount of More Than INR 35 Lakh
|8.25% for Loan Amount Up to INR 35 Lakh|
8.40% for Loan Amount of More Than INR 35 Lakh
|>800||8.00% for Loan Amount Up to INR 35 Lakh|
8.10% for Loan Amount of More Than INR 35 Lakh
|8.10% for Loan Amount Up to INR 35 Lakh|
8.35% for Loan Amount of More Than INR 35 Lakh
ICICI Bank Home Loan Interest Rates
ICICI Bank also provides home loans at interest rates that are dependent on the credit score of the applicant, employment type and the required loan amount. To know more, you can check the below table.
|Loan Amount (In INR)||CIBIL Score >800||CIBIL Score >750-800||CIBIL Score of 700-749||CIBIL Score<=700||NTC|
|Upto 35 Lakh||8.10%||8.15%||8.40%||8.55%||8.50%|
|Above 35 Lakh-75 Lakh||8.10%||8.40%||8.50%||8.70%||8.65%|
|Above 75 lakh||8.10%||8.50%||8.60%||8.80%||8.75%|
|Loan Amount (In INR)||CIBIL Score >800||CIBIL Score>750-800||CIBIL Score of 700-749||CIBIL Score<=700||NTC|
|Upto 35 Lakh||8.20%||8.30%||8.55%||8.70%||8.65%|
|Above 35 Lakh-75 Lakh||8.20%||8.55%||8.65%||8.85%||8.80%|
|Above 75 lakh||8.20%||8.65%||8.75%||8.95%||8.90%|
Importance of Credit Score in a Car Loan
A Car Loan is one of the most suitable options for individuals e looking to purchase their dream car but handicapped by lack of funds. There are a few lenders who provide loan amounts up to 100% of the on-road price. Others may provide up to 80%-90% of the on-road price. You will need to fund the remaining amount from your sources. The primary thing that a lender checks before giving the loan amount is the applicant’s credit score.
A credit score helps them in estimating the repayment habit of an individual. A high score will automatically indicate that a particular person is capable of handling future debts. Individuals with a good credit score (considered to be 700 or above) tend to get their loan approval in no time as lenders face lesser credit risk in providing the loan amount as compared to people with low scores. Some lenders also have the minimum credit score criteria to get the car loan. For example, to get the Bank of Baroda Auto Loans, the applicant must have a credit score of 701 or more.
Credit score also affects your car loan interest rate. Individuals with a high credit score tend to get the loan amount at lower interest rates than applicants who don’t have a good credit score. However, Car Loan interest rates change from one lender to another, so you must look at your repayment capacity to choose the suitable car loan interest rates.