Banks have decided to reward those customers whose credit score is good and who pay their installments on time. For the very first time in India, home loan interest rates (which determine your EMI) will be directly linked with the customer’s credit history.
And, Bank of Baroda has already become the 1st bank to implement such dynamic EMIs, based on credit history.
Dynamic EMIs: How Will It Work?
Credit Information Bureau of India (CIBIL), which receives financial data from all banks, and which creates the credit score of every banking customer, will be used for finalizing this dynamic interest rates. In a way, CIBIL Score reflects the financial discipline of the customer in terms of timely repayment of loans. Better CIBIL score means that the customer has a clean track record in paying the EMIs.
Thus, your CIBIL Score will now directly determine your EMIs for the home; something which has never happened before.
For those Bank of Baroda customers, whose score is above 760 points, they would now pay only 8.35% interest on home loans.
If a Bank of Baroda customer has a credit score between 725 and 759, then they will be required to pay a higher interest rate of 8.85% on home loans.
And, those who have a credit score of less than 725 points, they will be paying the maximum 9.35% interest on home loans.
For the first time buyers, who have no credit history, they have been placed in the middle, with an interest rate of 8.85%.
Now, as the credit score improves or deteriorates, the the EMIs will also relatively decrease or increase, depending on the score points, hence the dynamic aspect.
Bank Of Baroda Announces Lowest Home Loan Rate
Meanwhile, due to this dynamic home loan interest rates, Bank of Baroda is now offering lowest home loan rates in India. Their 8.35% slab is for those who have good credit history (760 points or above), is the lowest among all banks.
Other major banks such as State Bank of India is offering home loans at 8.65% while ICICI Bank is offering the same at 8.70%. However, SBI, ICICI and others have a flat interest rate, without considering the credit score.
Once this dynamic EMI concept is adapted by other banks, it is expected that the rates will drop for those who have good scores, and it will increase for those, who have bad scores.
It would be interesting to observe how this linking of CIBIL Score with EMIs will influence the home loan market in India. Do share your views by commenting right here!
Image Source: Flickr