Your CIBIL Score & Personal Loan: Understand the Relationship

Updated on: 14 Dec 2021 // 25 min read // Personal Loans
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It is not a secret that your CIBIL Score is a crucial factor in determining your eligibility for a Personal Loan. After you avail of a Person Loan, you must ensure timely repayments. Repaying your credit cards bills and loan EMIs on time, make you eligible for future credit.

Let’s further understand the relationship of CIBIL Score and Personal Loan below.

CIBIL and Personal Loan eligibility

When it comes to rating Credit Scores in India, CIBIL is the financial industry benchmark. All financial institutions refer to the CIBIL score to determine the Personal Loan eligibility. For instance, to determine your SBI Personal Loan Eligibility, SBI requires you to have a CIBIL score of 750+. Most financial institutions prefer to offer Personal Loans to applicants with 750+ CIBIL Score. Though in some cases, you can get approved for a Personal Loan if your CIBIL score is 700+, but if your CIBIL Score goes any lower, your chances of getting a Personal Loan reduce substantially. Therefore, you must always undertake all methods possible to keep your CIBIL Score above the desired threshold.

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Here are some useful tips to help you improve your CIBIL Score:

  • Repay your EMIs and Credit Card bills on time. This would reflect your financial discipline to lenders.
  • Maintain a healthy debt-to-income ratio, i.e., your EMIs should not be more than 50% of your monthly take-home income.
  • Do not settle any credit accounts randomly. Always try to make repayments in full.
  • Raise disputes for errors in CIBIL reports and get them rectified soonest possible.
  • Do not apply for multiple loans as it shows your desperation for credit.
  • Maintain old credit lines to prove your long credit history and financial discipline.
  • Reduce exposure to high-interest loans and consolidate them into a single low-interest loan.

Use your CIBIL to get great deals on Personal Loans

Now, that you know how to improve and maintain an excellent CIBIL score, here are the ways that can help you use your CIBIL Score to get great deals on Personal Loans:

  • Low-interest rates:

    Lenders want customers who can prove their financial discipline through an excellent CIBIL score. By having a required CIBIL Score, you are in a better position to negotiate. Lenders are willing to offer preferential interest rates to customers with an excellent CIBIL score. For instance, SBI Personal Loan Interest Rates are lowest for customers with a CIBIL score of 750+ as compared to other customers.

  • High-value loans:

    As your CIBIL score indicates towards you being a responsible borrower, lenders are willing to offer you high-value Personal Loans. You can use these high-value loans to handle your financial problems effectively or consolidate your multiple loans into a single loan. Although, it is important to mention that you should apply for only that much amount which is required.

  • Extended repayment tenor:

    Along with low-interest rates, an excellent CIBIL score makes you eligible for an extended repayment tenor against your Personal Loan. As the risk of default is reduced for lenders, they are willing to offer you the maximum repayment tenor. This allows you to enjoy more affordable EMIs, reducing the risk for default. Though, you should always opt for the shortest repayment tenor that your financials allow to keep the interest cost under control.

  • Low processing charges:

    Many lenders are willing to reduce the processing charges against a Personal Loan. They do not want to let go of a customer with an excellent CIBIL Score for Personal Loan and are therefore ready to levy the minimum processing charges available.

  • Add-on benefits:

    Well, if you have excellent negotiation skills and CIBIL Score, you can extract several benefits from your Personal Loan lender. Many banks offer credit cards with a higher credit limit, while other financial institutions offer free life insurance cover to their Personal Loan customers with CIBIL Score of 750+. So do not feel shy and ask the lender to provide some additional benefits.

  • EMI holiday:

    As the risk of default is significantly reduced in the case of a borrower with a 750+ CIBIL Score, lenders also offer the facility of EMI holiday. This facility provides you with the flexibility to start the EMI repayments after a given period, usually between one to three months. This flexibility ensures that you can manage the financial problems at hand easily and then plan the repayments later on.

  • Nil foreclosure charges:

    If you have a 750+ CIBIL Score, then you also have the power to negotiate. Lenders can be persuaded to waive-off the foreclosure charges against your Personal Loan. This allows you the flexibility to pre-pay the Personal Loan as and when you have spare funds.

  • Balance transfer:

    If you are unhappy with your present lender and have a 750+ CIBIL Score, you can opt for a Personal Loan Balance Transfer. Many financial institutions offer better interest rates and extended repayment tenor to customers transferring their Personal Loan account with them.

  • Top-Up loan:

    When you have been repaying your Personal Loan EMIs on time and have a good CIBIL Score, lenders are willing to offer you a Personal Loan top-up. This amount can be used for any financial requirements that you have and is over and above your existing Personal Loan account.

The benefits of having an excellent CIBIL Score are equally excellent and worth the effort. So, incorporate financial discipline in your personality and manage your financial problems effectively with Personal Loans that come along with great deals.

Also Read: Loan on Aadhaar Card – Impact of Aadhaar Card on Personal Loan

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