Why CIBIL Score Matters For A Personal Loan?November 15, 2018
People take personal loans to meet their immediate financial requirements. These requirements may be for varied reasons such as consolidating debts, paying off for marriage expenses or for higher studies. There are multiple banks and NBFCs that are willing to offer the loan to people at lucrative interest rates. Since these are unsecured loans, the risk involved is much higher for the lenders. Hence, they will favor the applicants with a higher credit score as it indicates better repayment capacity of the borrowers. Having a good credit score increases the chances of getting a loan quickly and at better interest rates.
What is a good CIBIL score?
Credit Information Bureau of India Limited (CIBIL) is India’s first credit bureau that collates details of a borrower’s credit history to know the credit score. Banks and lending institutions rely on the credit score to assess an individual’s creditworthiness and repayment ability before giving loan approvals.
Credit score is a three digit number which is calculated on the basis of applicant’s financial history. The CIBIL Score is in the range of 300 to 900 and people having higher score have better chances of getting personal loans approved without any hassle. Borrowers having a credit score of 650 and above have a better chance of getting loans approved. Your CIBIL score is based on several factors such as your payment history, credit history, guarantors on the loan, opening and outstanding loan amount, etc.
Advantages of CIBIL score
Here are some of the advantages of having a good credit score:
1. Easy approval of loans: If you have a credit score of 650 and above, you can easily get personal loan approval. A good credit score raises hope of lenders that you will repay your dues and EMIs on time. People having a lower credit score generally need to furnish a lot of documents which makes the process a bit time-consuming.
2. Low-interest rates: If you have a good credit score, you can get a personal loan at better interest rates. On the other hand, people having a lower credit score are granted loans and credits at higher rates of interest.
3. More negotiation authority: If you have a good credit score, you get a loan easily and at lower interest rates. Also, you have the negotiation authority to bring down your interest rate.
4. Higher credit limit: If your CIBIL score is high, you not only get loans at a lower rate of interest but also have chances of getting the upper limit of loans.
How does CIBIL score matter?
CIBIL score plays an important role in the Indian Financial System where almost all banks and NBFCs are dependent on it for quick approval and loan disbursal. Financial emergencies can arise anytime and you may have to apply for loans. This is when your credit score comes to play. Banks and NBFCs assess your repayment capacity on the basis of your credit score. Having a higher credit score will increase your chances of getting approvals easily. Plus, higher the CIBIL score, better are your chances of getting personal loans at a lower interest rate.
So, your personal loan application might get rejected if your credit score is low. And even if it gets approved, you may be offered a higher interest rate on personal loans. Hence, make sure to check your credit reports at regular intervals and make your repayments on time to have a healthy credit score.