A personal loan is a very crucial financial tool that can come to your aid in the times of a financial crunch. Whether it is a medical emergency or a business need, a personal financial situation or any other emergency, a personal loan is one of the best tools that can help you in any situation. But before applying for a personal loan, you must know the important terms associated with a personal loan. Whether you apply for a personal loan through a traditional lender or a personal loan app, they all check your credit score before approving your loan application.
Your credit score is a three digit score assigned to you by a credit bureau. This score is determined based on your past borrowing and repayment habits. CIBIL is India’s oldest credit bureau and many financial institutes rely on the CIBIL score to analyze the risk associated with your profile before approving your cash loan.
If you have a high credit score, then it reflects that you are a responsible borrower. The lender is more likely to receive the return on their loan amount and the interest on time. But if you have a poor credit score then it reflects that your past negligence and the lender mark you as a risky borrower. They will either decline your loan application or offer you the loan at a very high interest rate.
Reasons why you should check your CIBIL score before applying for a Personal Loan
Imagine you have decided to go on that dream trip or planned to renovate your home while relying on a personal loan for funds, but when you apply for the loan, your loan application gets rejected. The prime reason that majority of loan applications gets rejected is due to low CIBIL Score. Before applying for a personal loan, it is advisable to check your CIBIL score. As another loan rejection will further affect your score negatively.
Here are some important advantages of reviewing your CIBIL score ahead of a loan application:
- Quick Loan Acceptance
Based on your financial history, your credit score predicts your payment behaviour. This makes it easier for lenders to assess your creditworthiness. Though most loan apps do not only rely on the credit score to analyze your loan application, they do consider it an important aspect. It would be simpler for you to obtain a loan if you have already examined your credit score. You may also get pre-approved loans if you have an excellent credit score.
- The power to bargain
Many people do not know this, but you can actually bargain your interest rate and other fees associated with the cash loan with your lender. If you are aware of your credit score and it is good, you can negotiate the loan’s terms. The lender might waive off your processing fees and other conditions. It gives you the upper hand while making a deal for the best loan offers.
- Reasonable interest rates
A good credit score not only makes borrowing money simpler but also results in cheaper interest rates. If you’re unaware, every bank has established a range of interest rates for a certain sum of cash loan. But you can avail the loan for a reduced interest rate if your credit score is good. Therefore, having a high CIBIL score reduces the rate of interest which saves you a lot of interest costs.
- Select a Plan of Action
Knowing your creditworthiness in advance can give you a better notion of whether you can obtain a loan from a bank or other financial institution. You might start exploring other lending choices if your credit score is poor.
- Abstain from lowering credit score
If your loan application gets rejected by multiple lenders then it negatively affects your credit score. Checking your credit score before applying for a loan or even a credit card is advised in order to prevent this, especially if you have previously had loan application rejections.
Can I Check My CIBIL Score for Free?
Yes, you can check your CIBIL Score for free! Follow the steps given below to see if your CIBIL Score is up to the mark or not.
- Browse your lender’s website or download a personal loan app.
- The next step will ask you to fill in all your personal information.
- Once you fill in all the information you will receive an OTP.
- First, enter your OTP and go to the dashboard.
- Your credit report will be sent to you soon
According to RBI regulations, a person can obtain a free CIBIL report once per year. Following this, you must pay to obtain your CIBIL report and score; fees start at ₹550. Within 24 hours of the information being verified, you will receive your credit score and report in your email ID. There are other credit bureaus as well, so if you do not want to wait for a year or pay the extra money, then you can check your credit score through any other bureau.
Having adequate financial knowledge is a must for every individual. It not only helps you manage your finance well but it also equips you to address your financial crunches in a better way. Keeping a tab on your CIBIL score is one such important thing. Having an excellent CIBIL score not only helps you in getting a cash loan approved but it also benefits you in several other ways.