A personal advance can aid you in meeting all your financial needs. Whether it is for vacation, wedding, medical bills, or renovating a house, you can do it all with the help of an instant cash loan. These loans are easy to avail and easier to repay.
However, before applying for a personal loan, you must know all about your CIBIL score. Since personal loans are unsecured loans, your lender primarily relies on your monthly income and your credit score or CIBIL score to analyse the risk associated with your profile. Having a good CIBIL score is very essential to get easy loan approvals and better loan terms.
Read on to understand the in-depth details about your CIBIL score.
Importance of CIBIL Score to Get a Personal Loan
CIBIL is one of the oldest Indian credit bureaus that are responsible for maintaining your credit profile. It assigns you a credit score ranging from 300 to 900 based on your past borrowing and repayment history. It also reports any defaults, missing out on EMIs, credit behaviour and ongoing debts. These details help your lender make a more informed decision about the risk associated with your profile. Most lenders rely on this CIBIL score to determine your loan eligibility. Hence, you must check your CIBIL score before applying for an instant cash loan.
Here is a detailed outline that will help you understand the importance of your CIBIL score –
- It Tells Your Creditworthiness
Your CIBIL score is an indicator of your creditworthiness. It indicates your discipline when it comes to borrowing and repaying. Based on the borrowers’ prior repayment history and defaults, this figure assists the lenders in determining the borrowers’ capacity to repay the loans.
High CIBIL scores can result in more favourable loan terms for borrowers. While low CIBIL scores can result in loan rejections and higher interest rates. However, you can take the necessary steps towards improving your CIBIL score. Making on-time payments, closing some of your ongoing debts, and keeping your credit card utilization low can help improve your CIBIL score.
- It helps in the easy approval of loan applications
Your CIBIL score has a direct impact on how quickly your application will be processed. Having a poor CIBIL score can make it difficult for you to obtain a personal loan or a credit card. If you have a significant debt load or a history of late payments, then your loan application may also be rejected.
A good CIBIL score will increase your likelihood of getting approval for a loan. It also improves your total loan amount eligibility. Many lenders mention a certain credit score eligibility limit. However, there are certain lenders who may approve your instant cash loan application irrespective of your credit score.
- You Can Get Access to Low Rates of Interest
A high CIBIL score improves your loan credibility. If you have a high credit score, the lender is more likely to consider you as a low-risk borrower. Thus, they are more likely to offer you the loan at more favourable terms.
You can also negotiate with your lender for a lower interest rate if you have a high credit score. Even a slight change in the interest rate can considerably lower your total interest payouts. This will make your loan highly affordable.
- Higher Loan Amount
Having a high credit score makes you more qualified for a higher loan amount. While determining your loan amount eligibility, lenders consider a number of factors. Your credit score is one of those factors.
A good credit score results in increased confidence among lending institutions. Alternatively, lenders will see applicants with lower credit scores as risky borrowers, and they will be less likely to grant larger loans. Therefore, if you wish to receive a large loan amount, then a high CIBIL score is crucial.
- Getting Longer Tenure
Your CIBIL score is crucial since it ensures the lender about your repayment capability. They may be more open to offering you a loan for a longer tenure. A longer tenure can lower your EMI burden considerably. But, a longer tenure entails higher risk for the lender.
Having a good CIBIL score ensures your lender that you are a disciplined borrower with good financial management capability. Thus, they are more likely to extend longer loan tenure. However, do note that opting for a longer tenure may reduce your EMI burden but it will increase your total interest payout on the loan.
Helpful Tips to Maintain a Good CIBIL Score
Here are a few tips by us that will help you maintain a good credit score so that you can get the utmost benefit of a personal loan.
- Always make timely repayments of your loan.
- Never miss your credit card due date.
- Keep the right balance between an unsecured and secured loan.
- Avoid taking too much credit.
- Don’t apply for too many loans at the same time.
- Keep your credit card utilization below 30% of the approved limit.
- Regularly check your CIBIL score to report any discrepancies.
Conclusion
Due to the unsecured nature of a personal loan, a CIBIL score is considered a crucial factor in determining the risk associated with your loan. Financial institutes rely on this score to judge your loan repayment capability.
Most lenders do not provide instant cash loans to individuals having a poor credit history. Although there are some lenders like the loan apps that do not solely rely on your credit score to determine your credit profile, it does impact their lending decision. Hence, maintaining a good CIBIL score is very important.
