Mr. Aman Pandey, a resident of Allahabad applied for a personal loan at a local bank last year without checking his CIBIL score. As a result, within 24 hours he got a call from the lender and Mr Pandey got to know that his loan application was rejected due to low CIBIL score.
Owing to the reference shared above, when making a personal loan application, don’t undermine the importance of CIBIL score and keep a check on it from time to time. Many of you might not be aware, but there are many ways a CIBIL score can be your biggest ally while applying for a loan. Below are two ways on how:
1) CIBIL Score Determines your Eligibility for Loan
CIBIL score is one of the key factors for loan approval. When you apply for a personal loan, the lender generates a request to the credit rating agency asking them to share your CIBIL score. Based on the results the lender receives from the credit rating agencies, they determine whether you are creditworthy or not. In other terms, your CIBIL score determines your credit worthiness for the personal loan and plays a major role in deciding the fate of your application. Hence, it would be better to know your CIBIL score beforehand and gain an upper hand on the situation.
2) CIBIL Score is used to Calculate the Applicable Interest Rate
The second reason why your CIBIL score is the key to your loan application approval is, the lenders use it to calculate the interest rate applicable to your personal loan application. A good credit score is a sign of good credit discipline. If you have a healthy credit score, it means you have been paying your dues on time and your financial planning is up to the mark. In a way, it means lesser risk for the lender which highly influences the interest rate calculation. A good CIBIL score can get you a personal loan on a relatively lower interest rate.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.