Any type of loan Banks check the credit score before giving the loan. If the credit score is bad, then the banks refuse to give the loan. Even if the bank manager agrees to give you a loan, then they charge a higher interest. Let us tell you that if your credit score is bad, then the banks usually charge interest at the rate of 10.75% on the home loan. At the same time, if the credit score is good, then the banks give home loans at the rate of 8.35%. Let us know how the loan burden increases on you if your credit score is bad. We will also understand that you will pay Rs 19 lakh on a home loan of Rs 50 lakh.
Understand from this example, how will the debt burden increase?
Due to low credit score, you will have to pay Rs 19 lakh extra on a home loan of Rs 50 lakh. Let us understand this easily with this example. Let us assume that your credit score is 820 and you apply for a home loan of Rs 50 lakh in the bank. Looking at your better credit score, the bank gives you a home loan for 20 years at an interest rate of 8.35%. At this interest rate, you will return Rs 1.03 crore (loan of Rs 50 lakh and interest of Rs 53 lakh) to the bank. Your monthly EMI will be Rs 42,918.
Now, now, if your credit score, Suppose, 580, then the interest rate on a home loan of Rs 50 lakh can go up to 10.75%. In 20 years, you will have to return Rs 1.21 crore (Rs 50 lakh principal and Rs 71.82 lakh interest) to the lender. Your monthly EMI for 20 years will be Rs 50,761.
In this way, you will have to pay Rs 18.82 lakh extra because your credit score is bad.
If your credit score is 620, So the interest rate will be 10.25%. This means you will have to pay back Rs 1.17 crore (Rs 50 lakh principal and Rs 67.79 lakh interest). Your monthly EMI for 20 years will be Rs 49,082.
You can understand how important credit score is. So never spoil your credit score. Pay loan EMIs and credit card bills on time.
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