Cheap home loans aren't for everyone. Do you make the cut?

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Before determining final rate of interest, lenders assess the borrowers' repayment capacity
It's hard to miss advertisements from banks screaming dirt-cheap interest rates on home loans amid the festive season.

State Bank of India (SBI) is giving home loans at 6.70% without any upper ceiling on the loan amount. Kotak Mahindra Bank, Bank of Baroda and Deutsche Bank are offering lowest rates among all banks and housing finance companies at 6.50% onwards. The rates of other large banks such as Yes Bank and ICICI Bank are at 6.70% onwards, while Punjab National Bank (PNB) is giving at 6.60%.

However, these attractive interest rates are not for everyone.

Small factors like source of your income, whether you have a savings account with the lender or not and the loan size push the final rate of interest (RoI) upwards.

Most importantly, the shift of floating rate loans to external benchmarking has made credit score a crucial factor in determining the effective rate on the loan. "A substantial weightage is accorded to the credit score while deciding your rate of interest," said Abhishikta Munjal, chief risk officer, IIFL Home Finance.

Mint tells you the key factors that can raise interest rates on home loans.

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Drop in credit score

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