Yes, Your CIBIL Score Affects Your Personal Loan Interest Rate!

If you have a low CIBIL score, it can impact your personal loan interest rate. Want to explore further? Read on!

Arvind Yadav wanted to apply for a personal loan to fund his child’s education. He had a low credit score. But even then, he applied for an online personal loan on a leading creditor’s website.

He discovered that his application was approved. However, he landed a very high-interest-rate which left him disappointed.

There are many people like Arvind who have their loans approved but at a high-interest rate? Have you wondered why? It’s because of having a low credit or CIBIL score.

Yes, if you don’t have a good credit score or CIBIL score, either the lender may reject your personal loan application or may offer the loan on a high-interest-rate.

Thus, it’s always vital to have a strong CIBIL score if you have a personal loan or any loan to avail shortly.

Let’s shed some light as to how a bad or good CIBIL score impacts your personal loan interest-rate.

What does the CIBIL score denote?

When you apply for a personal loan, having a good credit score is better. It demonstrates that you handle your credit well in the past and can repay new credits easily.

What happens when you have a good credit score?

Having a good CIBIL score also helps you avail a personal loan on low-interest-rate because it also showcases that you are capable of repayment.

When you handle your credit effectively, it acts as a catalyst between you and the creditor to sanction your personal loan on a low-interest rate.

In short, a healthy CIBIL score rewards you with a low-interest rate on a personal loan.

What happens when you have a low or bad CIBIL score?

When you have a bad or low CIBIL score, it indicates that you have not handled your credit well during the past.

In such a situation, since creditors can’t trust you whether you will continue the same trend or not, they reject your loan application.

Even if they approve because of some other conditions, they let you have it at a high-interest-rate.

In short, a bad CIBIL score negatively rewards you with a high-interest rate on a personal loan.

Good and bad credit score

Excellent credit score – 760+
Good credit score – 700+
Fair credit score – 640+

If you want to apply for a low-interest personal loan, you must bring your CIBIL score under the above score brackets.

9 steps to improve your CIBIL score

➢ Check your CIBIL score
Make it a point to check your CIBIL score at least once a year to know how your credit is performing. Based on the report that you get, you can switch to improvements if the CIBIL score is low.

➢ Check your credit history
Also, conduct a full-fledged check of your credit history and rectify incorrect information, if any.

➢ Pay all your bills by the due date
Start paying all your outstanding bills by or before the deadline to improve your CIBIL score.

➢ List out all your debts
List all your outstanding dues, ranked by the most expensive to the least expensive. By doing this, you will know what to pay first and when.

➢ Pay off your most expensive debt first
Pay off the most expensive dues first and then pay the next in the line.

➢ Stop using the credit cards
Even if you must, limit your usage of the credit card as much as possible.

➢ Do not keep the credit card payments pending
Do not jump a credit card EMI or payment. It is because credit cards have the highest interest-rates and keeping it pending for long can levy high costs.

➢ Avoid taking more credit cards
Even if you get free credit card offers, do not accept them when you already have a low CIBIL score and have another credit card outstanding to pay.

➢ Do not close old credit card accounts
Doing this may backfire and may reflect negatively on your CIBIL history.

The Bottom Line

If you want to avail a personal loan, you will have to ensure that you maintain a good CIBIL score to get a low-interest-rate.

Now, you can avail an online personal loan and get it approved instantly.

What’s more, many lenders are offering to disburse money in your account in less than 24 hours if you match their eligibility and furnish all documents online.

Try to implement above suggestions to improve your credit score and ‘be personal loan ready’!

Also Read: How To Get A Personal Loan When You Have A Bad CIBIL Score