Having a High CIBIL Score Can Get You a Lower Rate of Interest?

We all want to tick boxes on our checklist for the activities we want to do and the goals we want to achieve. But not everyone can afford to have such expensive lifestyle choices with our salaries alone. This is where personal loans enter our lives and save the day. These are the credit funds that one can get from lenders to compensate for the overhead expenses encountered by us. Reasons for getting a loan may differ for everyone – from medical emergencies to home repairs to other miscellaneous expenses, personal loans take care of all such needs. 

But to avail a personal loan, one has to tick all the boxes in the eligibility criteria and one of the most crucial ones is to have a high credit score. 

The Correlation Between CIBIL Score and Loan Approval

Our credit score plays a huge role in determining our eligibility for a personal loan or a credit card. It is also one of the key influencers when it comes to determining the interest rates levied on the personal loan. When we pay our EMIs on time and have a good track record of repaying loans in the selected tenure, our credit score increases and we get to reap the benefits of being responsible with our finances. Lenders make a note of this and getting an approval for large amounts becomes easy. One also gets to choose the tenure as per their financial capacity and the interest rate can be decreased too. 

Before we go ahead and talk about the correlation between our CIBIL score and the loan approval process, let us first talk about how Airtel Personal Loans are idea for taking care of all the overhead finances. Apart from the fact that one can get the loan within 24 hours, the competitive interest rates are a huge plus point too and the process is 100% digital and requires no collaterals. 

Also Read: Personal Loan for CIBIL Score of 550

How a High CIBIL Score Influences Interest Rates:

The first thing we need to understand is the role of a CIBIL score. It’s basically a three-digit number that represents our creditworthiness, based on our credit history. The range is 300-900 and everyone has a CIBIL score as per their credit history, and it keeps increasing as an when we take loans and manage our finances well. A high CIBIL score means that we’re responsible with our credit and are less likely to default on our loan repayments. This trust translates into benefits for us, one of which is lower interest rates. 

Steps to Improve Your CIBIL Score for Better Interest Rates:

Improving our CIBIL score to get low interest rates is not an overnight process, but with consistent effort, it’s certainly achievable. Here are a few steps we can take:

• We must make sure to pay off all our debts on time. This includes credit card bills, EMIs, and any other outstanding loans.
• Keep our credit utilization low. Try to use less than 30% of our total credit limit.
• Maintaining a healthy mix of credit, which includes both secured (like home loans) and unsecured loans (like credit cards).
• Regularly check our credit report for any errors or discrepancies and get them rectified.

Factors That Affect Our CIBIL Score and Interest Rates:

Several factors affect our CIBIL score and, subsequently, the interest rates we’re offered. These include:

• Payment history: Late payments or defaults on loans negatively impact our CIBIL score.
• Credit utilization ratio: High credit utilization can lower our score. 
• Credit history length: A longer credit history can improve our score as it provides more data about our credit behaviour.
• Credit mix and new credit: Having a balanced mix of credit and not applying for new credit frequently can boost our score.

Also Read: Personal Loan Statement – How to download and view the statement

Impact of a High CIBIL Score on Different Types of Loans:

A high CIBIL score can have a significant impact on different types of loans. For instance, with a high score, we’re likely to secure a home loan or a car loan at a lower interest rate. This is because lenders view us as low-risk borrowers. Many lenders will also disburse the loan without any collateral as they know about our loan repayment capacity. 

Tips for Maintaining a High CIBIL Score for Lower Interest Rates:

Maintaining a high CIBIL score for low interest rates requires diligence and good financial habits. Some tips include:

• We need to always pay our bills on time.
• We need to try not to use more than 30% of our total credit limit.
• We should avoid applying for new credit frequently.
• We should maintain a balanced mix of secured and unsecured credit.

In a nutshell, our CIBIL score is a crucial factor that determines the interest rates we’re offered on loans. A high CIBIL score can lead to lower interest rates, saving us significant money over the lifetime of a loan. Therefore, it’s essential to maintain good financial habits and strive for a high CIBIL score.