5 Major Reasons Why CIBIL Score is Important for Instant Personal Loan

CIBIL is a credit bureau that collects and maintains records of an individual's credit history. It assigns a three-digit credit score to each individual, which measures the person's creditworthiness. The CIBIL score for Personal Loans ranges from 300 to 900. The higher the CIBIL score, the better an individual's credit history.

A high CIBIL score helps an individual quickly get approval for loans and other lines of credit. It also helps in getting lower interest rates. A low score, on the other hand, can lead to rejections and increased interest rates.

The CIBIL score is, therefore, an essential indicator of an individual's creditworthiness for an instant loan or any line of credit.

What is the link between a Personal Loan and a CIBIL score?

A Personal Loan is an unsecured loan a person can use for any purpose. Banks and other financial institutions mainly offer it to individuals for personal use. The amount a borrower can get depends on their income and credit score.

If your credit score is high, your loan will likely get approval at a lower interest rate. Conversely, a low credit score can result in the denial of a loan or higher interest rates.

Importance of CIBIL score for an instant Personal Loan

• Minimum credit score

  A high CIBIL score means you are a low-risk borrower, and your credit score measures your timely repayment ability. High credit scores indicate that you have managed your finances responsibly and will continue to do so in the future. It makes you a low-risk borrower, which is attractive to lenders. So, a high credit score can result in lower interest rates on loans, and other financial products, with better terms and conditions.

• Interest rate

  A high CIBIL score for a Personal Loan is always good news for borrowers. It means they will likely get a loan at a lower interest rate. The CIBIL Score measures an individual's credit history based on factors such as the number of loans taken in the past, how timely they repaid the loans, etc.

  A high score not only helps get low-interest-rate loans but can also help get approvals for other facilities such as credit cards and insurance. A high CIBIL Score is one of the critical reasons lenders approve loans quickly and without hassles.

• Loan amount

  The score determines the amount of instant loan you are eligible for and the interest rate. When your CIBIL score is high, you are a low-risk borrower and will get better terms on your loan. On the contrary, a low CIBIL score can lead to a higher interest rate and may also affect your loan eligibility.

  A high CIBIL score indicates a person's creditworthiness and is usually associated with a higher loan amount.

• Loan application approval

  When you have a high score, you have demonstrated that you have been a responsible borrower in the past and have repaid your loans on time. In addition, it indicates that you are likely to repay your new loan, which makes the lender more confident in approving your application.

  A low CIBIL score can lead to the denial of your loan application. The reason is that a low score indicates that you are a risky borrower and are more likely to default on your loan. So, if you want a loan, it is crucial to maintain a high CIBIL score for a Personal Loan.

• Creditworthiness

  A CIBIL score represents an individual's creditworthiness to a lender. It considers various factors in an individual's credit history, like payment history, amount of debt owed, and length of credit history.

  Creditworthiness is one factor that lenders look at when considering you for a loan. A high credit score means your loan application is more likely to be approved, and you'll get a lower interest rate. However, a low score could mean you won't get approval for a loan or will have to pay a higher interest rate.

Conclusion

In conclusion, a high CIBIL score is essential for taking out an instant loan as it indicates that the borrower is a low-risk customer. A high score can also lead to a lower interest rate on a loan, helping you save money in the long run. That is why it is essential to ensure your credit score is high before applying for a Personal Loan.

# This is a guest article authored by Poonawalla Fincorp. For any enquiries or details, you can visit the author's website.