Credit score refers to the number that shows your credibility by assessing your credit history. It generally ranges anywhere between 300 and 900 and shows your likelihood of timely making loan repayments. A higher score enhances your chances of loan approval and makes you eligible for bigger loan proceeds at a lower rate of interest. So, always ensure you hit on my credit score report option from the respective credit bureau’s site periodically to get a better idea about your credit standing. In the case of any issue, kindly ensure to take the required steps to instantly ameliorate your credit score. For those who are unaware, CIBIL full form is Credit Information Bureau (India) Limited, which is a trustworthy credit bureau determining your credit score and comes with their own set of credit policy, which is distinct from other credit bureaus.
When determining whether to approve your loan, financial institutions and banks usually factor in your credit score, which is computed by reviewing various parameters like your credit repayment record, outstanding loans, and your past credit usage. Here, in this blog, you will learn the crucial advantages of having a strong score when it is to secure a loan.
How can hold a strong score assist you in getting a loan?
Lenders review your score to view if it is risky to provide you with the funds. If you hold a strong score, it is simpler to get approval for a loan and you will require paying less interest constituent. Individuals with a high score are viewed as someone with less risk and are way better at making repayments on time. However, if you hold a low score, you may not avail the loan or you may require paying a higher interest constituent as there’s a higher chance that you may not repay it back timely.
Holding a strong score is not only helpful for availing loan approval but allows you to get a lower rate of interest. Also, it endows you with the power to negotiate well on the loan terms and rate of interest. To maintain a strong score, ensure to repay your dues in full and on time, use your credit in a responsible manner and periodically review your report for any errors or mistakes.
Listed here are some of the important ways for holding a strong score, which can assist you avail a loan –
Higher approval chance
When determining whether to accept your loan application, lenders view a strong score as proof displaying that you are likely to make the loan repayments on time. So, holding a strong score can ameliorate your chances of availing a loan approval.
Lower rate of interest
Lenders might provide a lower rate of interest to those with a strong score as they are viewed as less risky. Doing so can save some money over the long term.
Faster loan processing
Lenders might prioritise your loan application if you hold a good score as this shows your lower credit risk. It can also result in quicker loan processing as well as approval.
Higher power to negotiate
Holding a strong score can endow you the leverage when negotiating your loan terms and conditions, permitting you to negotiate for a better rate of interest, charges, and repayment tenures.
Better loan terms
If you are a borrower holding a strong score, then this might make you eligible for a favourable loan term like higher repayment tenures, lower fees, or bigger loan amounts.
In totality, holding a strong score can considerably enhance your chances of availing a loan and obtaining favourable terms and conditions.
How can you ameliorate your credit score?
In the case your score is low, ensure to carefully abide by a few crucial steps. These include the following –
Set up reminders to make sure you do not miss out on any credit repayments.
Keep your old loans and credit cards in excellent standing for long-term credit history.
Keep constant track of your credit limit to assess your spending.
Borrow from various ranges of lines of credit to potentially get a lower rate of interest and bigger loan proceeds.
Consider going for a higher repayment tenure while availing a loan.
Repay one credit option at a time and then opt for the next one.
So, holding a strong score ranging anywhere from 750 to 900 makes it crucial to opt for a loan with a low rate of interest. To maintain a strong score, it is crucial for you to repay your credit card dues timely and in full, use credit in a responsible and disciplined manner, and restrict making hard inquiries. While a few financial institutions and banks might offer loans to you if you hold a fair score, eligibility requires to be confirmed with them directly before approaching them. Usually, it is advised for you to aim for holding a strong score to enhance your chances of availing a loan with satisfactory terms and conditions.
Is it possible for you to avail a loan despite holding a low score?
Yes, a few financial institutions offer loans to those with low score, which is subject to specific conditions. It is recommended to get in touch with the financial institution and understand all requirements before placing an application for a loan.
How can you avail a low rate of interest on a loan?
Financial institutions provide comparatively a low rate of interest on loans to you as a borrower with a strong score preferably over 750. However, it is recommended still to connect with the financial institution to avail thorough understanding regarding all the loan approval procedures.
How can you get loan proceeds of Rs 1 crore from a financial institution?
If you hold a strong score, you might qualify to avail up to 80 per cent of the overall loan proceeds that you apply for. For instance, if you place an application for a loan equalingRs 1.20 crore or of a higher amount, you might be given the loan approval of Rs 1 crore. Also, lenders tend to assess your financial stability, income, repayment history or various other parameters according to the policies before they determine the amount that you qualify for.
