Having a High CIBIL Saves You Lots On Interest Rates
Any time talk begins about getting a fresh loan, interest rates are the first detail to spring to mind. There is not a soul out there who is not going to try for the lowest possible interest for a loan. It is not as easy as it may sound. However, with an excellent CIBIL score you automatically guarantee yourself the lowest interest rates for new loans you may want to take in the near future.
How The Loan Works
- Two parts comprise a loan: principal and interest. If the latter is too high so will your EMIs be; you will spend more to pay off those EMIs monthly, quarterly, etc. If interest is low, so will the EMI cost be.
- Varied loan products offered by banks come carrying different benchmark rates of interest. Even if the bank has told you how they rate a product and even if their site has notes on it, the number can change based on your credit report; it is not constant.
- Your CIBIL score determines how much interest banks will charge you. If it is below 750 (which is the recommended mark), your creditworthiness and credit behavior in general will be considered poor by most financial institutions.
- You will be deemed a risky candidate for loans and if you are eligible for one, the rates of interest will be quite high; more than the industry benchmark. If your risk quotient is too high, the bank can outright refuse you the loan.
There are legitimate ways to enhance and polish your CIBIL score.
- Get your hands on your own credit report and CIBIL score. Loan and credit card repayments may be pending or overdue. There is no easy way to put this, but you must find a way to close these and resolve your balances.
- Too much credit utilization is a bad thing. Such credit behavior is not condoned, in fact it is frowned upon because only those with a lot of debt will have need to take credit over and over again. Avoid doing this no matter how dire your financial situation. There is always another way, at least as far as interest rates and CIBIL scores are concerned.
- Any dark inquiries on your report? This too can work against you. This occurs if or when you have applied for more than a handful of loans in a short time span.
If this is your situation, take time off to raise your CIBIL score by doing things right. Then, you can move back to getting that loan at low interest rates. At this time…
- Do not apply for loans at multifarious banks.
- Save more than you spend
- Cut unwanted expenses
- Do something about your job situation so you can earn more, be paid more, or find competent jobs, even a few part-time ones, to help you resolve or settle all your dues and outstanding amounts.
Once all the tough work is out of the way, your defaults are all erased, and you have a competent CIBIL score of 750 – probably higher, if you went out of your way and did your very best – then getting that loan will be less of a burden. When you see how low the interest rates are, you will find your financial future more secure. This, we are sure, will put a big smile on your face this 2016. However, it is going to take some work, starting now.
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