Having a roof over one’s head is a dream for many. However, with the current rate of price increases, buying a house or apartment with cash is no longer possible. In such situations, taking a home loan is often the only option. And the interest rates on these loans are not excessively high. That’s why many people want to take out a home loan.

However, it’s important to keep in mind that in some cases, banks may charge higher interest rates on home loans. There are specific reasons behind this. So, without wasting any more time, let’s learn about those reasons.

Banks won’t give you a loan based on your appearance. Before granting a loan, they will examine several factors. And in this situation, the first thing they will check is your credit score. The higher the score, the greater the chance of getting a loan at a lower interest rate. Conversely, a low credit score will result in higher interest rates.

In this case, if your credit score is above 750, you will get a loan at a lower interest rate. On the other hand, if the score is below 700, the interest rate will increase. That’s the simple calculation.

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Property Location

The interest rate on your loan often depends on the location of your property. If you buy a house or apartment in a very underdeveloped area, the loan may become a risk for the bank. In such cases, some banks increase the interest rate. So, you need to keep this in mind.

Your Employment Type

The type of job you have also affects the home loan interest rate. If you work in the government sector, you will get a loan at a lower interest rate. On the other hand, if you work in the private sector, you may have to pay a higher interest rate in many cases.

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Amount of Existing Loans

Many people have multiple loans running simultaneously, and then they apply for a home loan. In such situations, banks tend to increase the interest rate because giving a new loan becomes a risky proposition for them. Therefore, you need to be careful in such situations. Avoid taking out too many loans.

Type of Loan

Home loans are generally of two types: fixed rate and floating rate. It has been observed that fixed rates are always higher, while floating rates are considerably lower. So, keep this in mind. Use your judgment wisely when taking out a loan.