The Connection Of Loans And CIBIL Score
There are instances in life when you don’t have the financial bandwidth to fulfil goals. These could be short-term goals like renovating your home or even long-term decisions like funding your or your child’s education. In instances like this, personal loans come in handy.
A personal loan is an unsecured loan that helps you bankroll goals like buying a home or getting your child married. Because personal loans don’t require you to pledge an asset to the financial institute, they look at other parameters to evaluate whether to approve or reject a bank loan.
One of these factors is your CIBIL Score.
What Is CIBIL Score?
CIBIL Score is a three-digit score that a credit information company gives you. It ranges from 300 to 900 and is based on your credit history. TransUnion CIBIl is one of the leading firms in India that calculates this number.
The higher your credit score, the more creditworthy you are and therefore, the more your chances of getting a personal loan. The lower your credit score, the lesser your chances of securing a personal loan.
Typically, a score of 750 and above is considered a good CIBIL score when you think of applying for a personal loan. Here’s how your CIBIL Score can affect your ability to get personal loans:
- The Score is the first impression a lender has of you. By checking your score, they can gauge if you will be able to pay the loan on time or not. It is why a high score provides the bank with a sense of confidence in you. Vice versa, a low score becomes a red flag.
- Another way CIBIL affects loan process is the speed. A solid score helps expedite the loan application. If the Score is really high, the processing time can be reduced to the bare minimum. This means you get access to funds that much faster to take care of your needs. It is especially helpful during emergency cases.
How Does A Bad CIBIL Score Impact Personal Loans?
If you have a low credit score, it doesn’t mean that you won’t be able to avail personal loan ever. It just means finding one becomes that much tougher, and when you do, it will come with a lot of terms and conditions attached.
For example, a low CIBIL score tilts the tables towards the lender. They can charge you a high-interest rate since your ability to repay the loan within time is under question.
The amount of loan you get is also affected by poor credit history. With a low score, the amount approved will always be less than what high Score entails. Moreover, the documentation required while getting a personal loan with low CIBIL Score is far more.
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