A Good CIBIL Score Can Help You Get a Better Deal On Your Personal Loan
With a CIBIL score over 750, you ensure that your Personal Loan application is not only approved, but also comes with a low rate of interest.
When Nalini Rao, a 30-year-old HR manager, moved with her husband and child from Hyderabad to Mumbai, she decided to take a Personal Loan. With a new apartment came renovation expenses, and Nalini thought a Personal Loan was the right answer to getting the funds to undertake immediate home revamp expenses and, more importantly, to keep her family happy. At her new job in Mumbai, Nalini met her senior HR manager, Vaibhav Mohite, who was also taking a Personal Loan.
Vaibhav, 36, planned to use the Personal Loan to put his oldest daughter through an international high school to better her chances at attending college overseas. Nalini and Vaibhav happened to apply for a Personal Loan around the same time, and when the results came back, it spelled good news for them both. However, whereas Nalini was sanctioned a Personal Loan at 12.75%, Vaibhav saw that his approval came with an interest rate of 14%. Secondly, while Nalini was granted a Personal Loan of Rs 20 lakhs, Vaibhav was sanctioned Rs 15 lakhs.
What caused this difference?
Even though Vaibhav was older and his salary was slightly higher than Nalini’s, Nalini’s CIBIL score was at 850, while Vaibhav’s credit history saw a few late EMI payments for a previously taken home loan. Thus his CIBIL score was at 700. A higher CIBIL score thus reduced Nalini’s overall interest on her Personal Loan.
What Does a Good CIBIL Score Tell Your Lender?
When taking a Personal Loan to get fast and easy access to funds, keep in mind that your lender doesn’t ask for a guarantor or collateral as security on the loan. This means that the lender is taking a risk by lending you the loan amount, which can go up to Rs. 25 lakhs. This means that your lender analyses your ability to pay back your Personal Loan in other ways.
A CIBIL score may vary from 300 to 900, with 300 being the lowest. The minimum CIBIL score required for a Personal Loan is generally 700. You can check the cut-off number of your chosen lender as every lender may have a different CIBIL score, below which they do not sanction a Personal Loan.
This is because a CIBIL score:
- Showcases your Credit History
A CIBIL score takes into account your past record. This means that any late payment or EMIs or credit card bills or unpaid dues on past loans lower your score and timely payments and a good credit history raises your score. An unapproved loan request can also lower your CIBIL score, and may cause your lender to question why your past loan request was denied.
- Indicates your Creditworthiness
A lender can thus take a decision based on your past behavior with credit, be it loans or a credit card. A CIBIL score helps in assessing the risk a lender takes by sanctioning a loan to a borrower without any collateral.
- Inspires Confidence in the Lender
A good CIBIL score proves that you have maintained a good credit history, i.e., you have paid your credit card bills on time, have paid EMIs on past loans on time and have not defaulted on any payment. Thus, chances are that you will also show the same diligence when it comes to paying back your new Personal Loan.
Apart from a low rate of interest, a high CIBIL score may even get you a better deal on your Personal Loan in terms of a higher loan amount, faster approval, a longer tenure, etc.
Taking a Personal Loan with bad credit doesn’t automatically mean your loan application will get rejected, but this may lead to higher interest rates being charged to you. There are various ways to ensure that you get a Personal Loan despite a low credit score and even increase your CIBIL score by paying off pending loans, submitting other required documents diligently, choosing a lower loan amount, etc.
Apply for a Personal Loan at low rates of interest and easy repayment options from Bajaj Finserv. For more information on Personal Loans from Bajaj Finserv click here: