Why CIBIL score is important for personal loan
With high inflation rate and commodities prices skyrocketing in India, lately, it has become very challenging to manage our expenses without availing a personal loan. Be it for your education or buying a car or sometimes the wedding expenses you may require a personal loan to settle the funds.
A number of Banks, Non-Banking Financial companies and financial institutions offers several types of loans to debt seekers. These loans are approved only when the person has a good CIBIL score. With a good CIBIL score, you get loans easily and also at a very good interest rate.
What is CIBIL SCORE?
The credit score is commonly known as CIBIL score in India. CIBIL score is issued by Central Information Bureau of India Limited which denotes the application creditworthiness and ability to repay his debts. CIBIL launched first scoring module in 2007 and in early 2011 CIBIL started providing credit scores to individual applicants as well.
CIBIL score ranges from 300 to 900 points on a basis on Credit History, Credit utilization, existing unsecured loans etc. Each bank has independent scales for issuing loans to applicants. But applicants having CIBIL score as low as 550 also have been granted loans in the past.
Why CIBIL score is important
CIBIL plays a vital role in India’s gowning economy and it helps an applicant to secure loan instantly and also help Banks, NBFC and Financial institution to manage their lending proficiently. Having a good CIBIL score will allow the below advantages to the applicant.
Instant loan approval: Having a good CIBIL score signifies that you are a great prospect to offer a loan. Banks and Financial institutions will give you the loan ASAP. Having a lower score will have consequences such as furnishing many sets of documents and a guarantor which will result in time-consuming loan disbursement.
However, you may avail loan without a CIBIL score from the local lender with a very high interest rate.
Low-interest rate credits: CIBIL score is directly related to the Interest rate. How higher your CIBIL score relatively lower rate of interests. If you have low CIBIL score, a few Banks may offer you the loan with higher Interest rates.
Authority to negotiate: With higher CIBIL score you get upper hand while you are negotiating the loan interest rate with the banks. Generally, banks give you discounted interest rate when you possess a good CIBIL score but you can still negotiate further.
Best offer on Credit Card: Do you fancy any premium credit card? Well with a great CIBIL score you can get premium credit cards with a higher limit and amazing offers. Your credit card limit will depend on your income statement.
Higher Approval Limits: Before issuing loans banks checks your Debt burden ratio (How much repayment you can afford with your current income). However, when you have a good CIBIL score many banks offer you higher approval limit.
Easy Approval for Leased/Rented Properties: Housing loan or leasing is much easier when you have a good CIBIL score. Banks mostly process your loan application from 5 working days to 10 working days.
CIBIL score is important and plays a vital role in the Indian financial system. How healthy is your financial life is judged only based on your CIBIL score? You should always aim to improve your CIBIL score by adapting to healthy financial habits such as paying your debts on time, clearing your existing dues and having a high ratio of secured credit.