Personal loans have lower interest rates than credit cards. Hence, many people avail it to consolidate debts or for personal expenses like paying an EMI for a gadget or a wedding or travel, etc. When you plan to take any loan and start doing the market research, you would have heard of the most repeated term called credit scores or CIBIL scores.
CIBIL scores range between 300 to 900. When you apply for a personal loan, the lender reaches out to the Credit Information Bureau India Limited (CIBIL) to know your credit information. The CIBIL has an information database that has every individual credit payment history over a period of time.
Did you know this three-digit number plays a vital role in determining your loan approval and scoring the best deals from your lender?
Let’s see why.
5 Reasons Why to Take CIBIL Score Seriously While Availing Personal Loan
- CIBIL Score Helps You Get the Best Interest Rates
Even a small percentage of reduction In interest rates will give you a significant advantage when you see it as a cumulative total. When you have a good credit score, you have the power to negotiate with your lender and speak about your preferences in interest, tenure, eligibility, and more. Banks prefer customers with good credit scores; hence, they can quickly reduce it and offer you the best deals.
Pro Tip: Use a personal loan interest rate calculator to determine the best interest rates and the EMI for the interest rate.
- CIBIL Score Determines Your Loan Eligibility
Your CIBIL score quantifies your spending habits. A low CIBIL score determines you as a risky lender. Hence the financial institution you have applied for will be skeptical about assigning you loans of the higher rate as you are all under the risk category. If you are looking for personal loans with more loan eligibility, then improving your credit scores beforehand will help you score the maximum eligible amount for you.
- You Get Better Offers and Pre-Approved Personal Loans
Lenders offer pre-approved loans for less risky borrowers. Though personal loans are quicker, pre-approved loans are even swifter and have the best propositions. Additionally, since the loans are already pre-approved, there won’t be any time lag for your application processing and the loan disbursement.
The lender will not have much to doubt and put your application on hold once your docs are verified through digital processing. It also gives you upgraded lending offers in terms of loan eligibility, interest rates, tenure. CIBIL scores can even get you great deals without any collateral.
- Reflects Your Finance Habits
CIBIL score for a personal loan is something like a record of your spending karma. The three-digit value is a rating of your spending habits. It is determined by analyzing whether you max out your credit card or defaulted on your loan in the past.
Lenders can also verify if you have applied for multiple loans using the score. If the score is below 750, the lending company will reject the loan, and if above that, you are considered a high scorer. The points drop each time there is a drop in your credit health.
- Quicker Loan Processing
Personal loans determine your credibility. If you meet the eligibility criteria and have a CIBIL score of above 750, be rest assured of your loan approval, as your creditworthiness is already verified to a certain extent.
Having a clean credit history will ensure the lender that you will pay back your EMI on time. Hence the loans are quickly processed, catalyzing swift disbursal of funds to your account.
CIBIL scores are used apart from lenders too,
Landlords perform credit checks on credibility before renting out their place. Furniture rental companies check for the customers’ credit scores too before renting out stuff to them. Apart from these, organizations perform credit checks before hiring a candidate for a job.
CIBIL scores play a crucial role in determining your loan terms. It gives you good financial leverage. You can quickly check your credit information online using many free tools available online to know where you stand.
It is ok if your CIBIL scores are low currently, as you can constantly improve your credit scores by following good financial habits. Knowing the tips to enhance CIBIL scores and following them religiously will help you increase the scores and become a credible borrower.