There are several applicants who choose personal loans for diverse purposes and get them approved, only to find out that they are required to pay higher rates of interest than normal. This usually happens in a scenario where the applicant has a low CIBIL/credit score. Your personal loan application may be rejected outright in case of a low CIBIL/credit score or you may get the loan approved at a higher rate of interest.
It is important to maintain a high CIBIL/credit score if you are looking to apply for a personal loan sometime soon. When you have a high credit score, it indicates that you have a good credit history and can easily repay new credit. If you have a good CIBIL score, you can get lower interest rates on personal loans since the lender will see that you can repay the loan and have a good track record till now.
A low CIBIL score indicates that the applicant has either defaulted on payments or mismanaged credit earlier. Creditors will not be able to trust the applicant and will feel that the same trends may continue when it comes to repayment. Even if the personal loan is approved, it is offered at a higher rate of interest. A good credit score is anything above 700 while a score above 760 is considered as excellent. A score above 640 is also considered to be a fair credit score.
Here are some ways to boost your CIBIL score:
- Check your CIBIL score periodicially
- Check the credit history and rectify any incorrect information in the same
- Repay bills in a timely manner
- Make a list of debts and prioritize repayment
- Repay the costliest debt first and then move onto the others
- Stop using or limit usage of credit cards
- Do not miss credit card payments since they have high interest costs
- Do not accept more credit cards even if you get free offers
- Do not suddenly close your previous credit card accounts since it negatively impacts credit history
You have to maintain a good credit/CIBIL score in order to get a low rate of interest on your personal loan. You can apply for personal loans online these days and approvals are often granted within a few minutes if you meet all the eligibility criteria. Maintaining a good credit score will make sure that you are ready to avail of a personal loan.