How to Get Low Interest Rate on your Home Loan

Generally, the home loans are for huge loan amounts and are for longer loan tenures. Therefore, the banks tend to thoroughly evaluate the applicant’s credit history, repayment capacity, and income levels. The banks also inspect the property that is to be acquired. However, the applicant should be able to meet the eligibility requirements of the bank in order to get approval on their home loan application. If a bank offers low interest rates on their home loan application, it is important to note that low interest rates are frequently accompanied with rigorous eligibility conditions. Therefore, if you are able to fulfil these rigorous eligibility conditions, you may be able to get the best home loan in India. 

Factors Determining Interest Rates on Home Loan

There are some factors that banks consider while determining your eligibility for a home loan:


Your credit score is a number that shows the history of your credit. Those with a good credit score who have paid their EMIs and credit card bills in full on time in the past tend to pose that they have not been too dependent on credit. Lenders will consider you for a home loan if your CIBIL score is above 750. Furthermore, banks and HFCs are increasingly basing their housing loan interest rates on applicants’ credit scores. Because a good credit score reflects cautious credit behaviour and financial discipline, many banks and HFCs provide home loans with lower interest rates to candidates with higher credit scores. Please keep in mind that if the house is co-owned, then it is most likely that the banks will check the credit score and history of both the owners, even if only one of the owners is applying for a home loan.

Employment & Income Status of the Applicant

Lenders take into account your income, type of employment, and employer profile, among other things. Lenders prefer candidates who work for the government or public sector organisations, as well as large and/or reputable private sector enterprises, because they have better job/income security. As a result, lenders provide cheaper home interest rates to these consumers. On the other hand, acquiring a Home Loan at a low interest rate may be difficult if you are self-employed with fluctuating earnings, have an unstable job profile, or have only recently begun your professional career.

Type of Loan & Loan Amount

The amount of money you wish to borrow may also influence the interest rate on a house loan. Interest rates for home loans of up to Rs. 30 lakh are frequently lower than rates on larger loans. To achieve a lower interest rate on your home loan, try to put down as much money as possible. This will not only help them pay off their debt more quickly, but it may also help them get a lower interest rate. The interest rate on a home loan varies according to the loan type. Conventional interest rates apply to regular home loans, whereas plot loans and NRI home loans often have higher interest rates.

Benchmark Rate (External)

Beginning in October 2019, the RBI will link housing loan interest rates to external benchmark rates such as the RBI Policy Repo Rate, the Government of India 3-Month and 6-Month Treasury Bill yields published by Financial Benchmarks India Private Ltd (FBIL), and any other benchmark market interest rate published by FBIL. Under the new arrangement, any change in the external benchmark rate will affect the home loan interest rate of all Indian banks.

Type of Interest Rate

Fixed and floating interest rates are the two types of home loan interest rates. The interest rate you choose for your home loan determines the rate at which you repay your lender. Fixed-rate home loan EMIs remain constant throughout the loan period. Floating rates, on the other hand, adjust in response to changes in lending rates, such as the Repo Linked Lending Rate (RLLR). Lenders frequently demand higher interest rates due to the higher interest rate risk associated with fixed-rate home loans.

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