People borrowing a home loan are always looking for a cheap home loan scheme, without exactly having an idea about what really makes home loan expensive or cheap, so before starting with any things it is important for a borrower to understand more about the factors that can have an impact on the total cost of a loan and what are the necessary expenses which are needed to be taken care of.
When a person applies for a home loan he is required to pay processing fees, which is non-refundable, its extent can vary from bank to bank but most of the bank levies 0.50% of the total loan amount as processing fees. There are various other charges also which a borrower will require to pay but the processing fee is the heftiest one out of them.
The most significant thing in a home loan which affects the cost of home loan most is the interest rate applicable on it. The interest rate offered by the banks can differ as there are a lot of schemes that they offer and out of them they can choose the loan scheme with minimum interest rate or if he has some specific requirements then he must look to get interest rate as low as possible in that category.
However, sometimes a lender can differentiate among various applicants and can offer different interest rates on the same loan scheme. An applicant who fits in well in the eligibility criteria of a lender and most importantly if he possesses a good credit score can avail best interest rate on his loan as compared to others. So, in order to have a lower cost of a loan, it is necessary for the applicant to have a high credit score.
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