Frequently Asked
Questions

Most banks require a minimum CIBIL score of 750 for the best interest rates. Scores between 650-749 may still get approved but at higher rates (typically 0.5-2% more). Below 650, most banks will reject the application. HDFC and ICICI are slightly more flexible at 700+, while PSU banks like SBI often require 750+. Your score is checked at the time of application, so avoid applying for new credit 6 months before you plan to apply for a home loan.

FOIR stands for Fixed Obligation to Income Ratio — it's the percentage of your monthly income already committed to EMIs and fixed expenses. Banks typically allow a maximum FOIR of 40-50% for home loans. So if you earn ₹1,00,000/month and already pay ₹30,000 in EMIs, your remaining FOIR capacity is ₹10,000-20,000 for a new home loan EMI. This directly caps how much you can borrow. Use our Rate Predictor to see your exact FOIR-based eligibility.

Yes, but the disbursement is done in stages linked to construction progress — not as a lump sum. You pay interest only on the amount disbursed (called Pre-EMI) until construction is complete, then full EMIs begin. The risk: if the builder delays or defaults, you're still paying Pre-EMI. Always check RERA registration of the project before applying. Banks like SBI and HDFC have approved project lists — loans for projects on these lists are processed faster.

No. As of 1 January 2026, the RBI has banned prepayment penalties on all floating-rate home loans. This means you can make partial or full prepayments at any time without any charges. For fixed-rate home loans, banks may still charge 2-3% of the prepaid amount. Always confirm the rate type (fixed vs floating) before signing — most home loans in India are floating rate, so this protection applies to the majority of borrowers.

LTV (Loan to Value) is the percentage of the property value the bank will finance. RBI mandates maximum LTV caps: 90% for loans up to ₹30L (you pay 10% down), 80% for loans ₹30L-75L (you pay 20% down), 75% for loans above ₹75L (you pay 25% down). The down payment must come from your own funds — banks do not allow borrowing for the down payment. Budget an additional 6-8% of property value for registration, stamp duty, and processing fees, which are not included in the loan amount.

Two sections of the Income Tax Act apply: Section 80C: Deduction up to ₹1.5L per year on principal repayment (shared with other 80C investments like PPF, ELSS). Section 24b: Deduction up to ₹2L per year on interest paid for a self-occupied property. For a let-out property, there is no cap on interest deduction. For a ₹50L loan at 8.5% over 20 years, total tax savings across the tenure can exceed ₹18L. Use our True Cost Calculator to see exact projections for your loan.

Banks advertise their lowest possible rate — typically reserved for existing salaried customers with CIBIL 800+, working at a large listed company, with 3+ years at the same employer. Most applicants receive rates 2-5% higher than advertised. Key factors that push your rate up: CIBIL below 750, self-employment, shorter employment history, existing high FOIR, and applying as a new customer (vs existing relationship). Use our Rate Predictor to see your likely actual rate across banks before applying.

Yes — every time a bank pulls your credit report (a "hard inquiry"), your CIBIL score drops by 5-10 points temporarily. Applying to 5 banks at once can drop your score by 25-50 points, which then affects the rates you're offered. The right approach: use an eligibility checker (soft inquiry, no score impact) to narrow down to 1-2 most likely banks, then apply formally. Space formal applications at least 3 months apart if the first is rejected.

A top-up loan is an additional amount borrowed on an existing home or personal loan, usually at a lower rate than a fresh personal loan (since the bank already knows your repayment history). If you have an existing home loan and need funds, a top-up loan at 9-10% is almost always better than a fresh personal loan at 12-15%. Eligibility requires 12+ months of regular repayment on the existing loan. Maximum amount is typically capped at the original loan amount or ₹50L, whichever is lower.

For a self-employed co-applicant (parent/guardian), banks typically require: ITR for last 2-3 years, business continuity proof (GST registration, shop licence, or partnership deed), bank statements for last 12 months, and business address proof. The ITR must show income consistent with the loan EMI obligation. For loans above ₹7.5L, collateral is also required. See our Freelancers & Gig Workers section for detailed guidance on alternative income documentation.

Depends on the loan amount. RBI guidelines: Under ₹4L: no collateral or guarantor required. ₹4L to ₹7.5L: a third-party guarantor is required (no property collateral needed). Above ₹7.5L: tangible collateral required (property, FD, LIC policy). The property must be in India and clear of existing loans. For premier institutions (IITs, IIMs, AIIMS), some banks offer collateral-free loans up to ₹40L based on the institution's placement record.

The moratorium period is the repayment holiday — you don't pay EMIs during this time. It covers the course duration plus a grace period of 6-12 months after completion (varies by bank). During moratorium, simple interest accrues on the loan. Some banks offer the option to pay this interest during the moratorium (reducing total cost) — this is worth doing if possible. Repayment tenure starts after moratorium, typically 5-15 years depending on loan amount and bank.

Most banks offer car loan tenures of 1-7 years (12-84 months). A few lenders extend to 8 years for higher loan amounts. Longer tenure means lower EMI but significantly more interest paid overall. For a ₹10L car loan at 9%: 5-year tenure costs ₹2.28L in interest, 7-year tenure costs ₹3.25L — nearly ₹1L more for the same loan. Our True Cost Calculator shows this comparison in detail. Choose the shortest tenure your budget allows.

Probation is a significant barrier for most banks. SBI, HDFC, and ICICI typically require completion of probation period (usually 6 months to 1 year) before a loan is approved. A few private banks and NBFCs are more flexible for applicants with strong CIBIL scores (750+) and from reputable employers. Short-term contracts are treated similarly to freelance income — see our Freelancers guide for which lenders are more flexible with non-standard employment.

Yes, and this is one of the most effective ways to increase your eligible loan amount. Joint applications combine incomes, effectively doubling the FOIR headroom. Both applicants' CIBIL scores are checked — the lower score often influences the rate offered. If one spouse has a significantly lower score, it may be better to apply solo and add the other as a co-owner of the property (not co-applicant on the loan). Discuss this with your bank before applying.

This is the most common hidden cost trap in Indian lending, particularly for vehicle and personal loans. Flat rate: Interest calculated on the original loan amount for the entire tenure. "12% flat" means you pay 12% of ₹10L every year regardless of how much you've repaid. Reducing balance: Interest calculated only on the outstanding principal, which decreases each month as you repay. A "12% flat" rate is equivalent to approximately 21-22% on a reducing balance basis — nearly double. Always ask: "Is this flat rate or reducing balance?" and insist on the reducing balance equivalent for any comparison. All rates on The Credit Compass are on a reducing balance basis.

The true cost of a loan includes several fees banks don't always mention upfront: Processing fee: 0.5-2% of loan amount (sometimes capped), charged upfront, non-refundable if you cancel. MODT charges (home loans): 0.1-0.2% of loan amount for registering the mortgage, paid to the state government. Legal and technical fee (home loans): ₹5,000-15,000 for property verification. Insurance premium: Some banks bundle loan insurance — this is optional, not mandatory. Ask explicitly. Penal interest: 1-3% per month on overdue amounts (in addition to your regular interest). Always ask for the loan sanction letter before signing — it must list all fees. Compare this, not just the interest rate.

Jan Samarth (jansamarth.in) is the Government of India's unified loan portal for credit-linked government schemes. It covers 15 active schemes including education loans under Central Sector Interest Subsidy, agriculture loans, livelihood loans, business loans for MSMEs, and PM-Surya Ghar solar financing (added 2026). If you think you may be eligible for a subsidised government loan, check Jan Samarth first before applying to a private bank at full rates. The portal connects you directly with the participating bank for the relevant scheme — no middlemen.

The Reserve Bank of India regulates all banks and most NBFCs in India. Key documents for borrowers: RBI Master Direction on Housing Finance: governs all home loan rules including LTV caps, prepayment rules, and interest rate reset norms. Fair Practices Code: every regulated lender must publish this — it covers what they can and cannot charge you. SACHET Portal (sachet.rbi.org.in): RBI's complaint and verification portal — check if a lender is registered, file complaints, and check alerts on fraudulent lenders. All information on The Credit Compass is verified against official RBI publications. We link to source documents throughout.