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Interest rate is the very first thing that comes to the mind of an individual who has applied for a loan. Interest rate is a crucial determinant while availing a new loan. Borrowers usually feel that the interest rate should be low, whenever they opt for a loan. Then the EMI that needs to be paid will also be less. If the interest rate is low, if you need to pay lower interest for a loan, you should have a high CIBIL Score. So if you want to get charge with minimum interest, you should be having a high Credit Score.
How Will Creditseva Help You
Creditseva will help you in maintaining a good CIBIL Score so that you do not fall into the category of individuals who are paying higher rate of interest because they have a low credit score. You will get constant alerts to make all your payments on time so that you do not get late in paying off your dues. This way your CIBIL Score will be remaining good. With Creditseva’s applications, you can get expert advice as to what are the ways to improve your credit score so that you will be charged a lower rate of interest.
How Is the Interest Rate Decided?
Each bank has a different rate of interest for a different type of loan. Different loans have different rate of interest. The rate of interest charged by a bank depends on the CIBIL Score of an individual. Whenever an individual applies for a loan, the banks check that individual’s CIBIL Score and report.
If the credit score of an individual is 750 or more than 750, there are chances for the individual to get the loan at a rate of interest that is competitive. If the credit score of an individual is higher, then that individual has an advantage to bargain with the lenders before the finalization of the interest rate that is suitable for that individual. A lower rate of interest on loans enables the individual to save some money for the future or some unforeseen circumstances.
If the credit score of an individual is low, then it is likely that the bank will charge you a higher rate of interest. It might also happen that your application for the loan that has been made by you is rejected by the bank.
If you observe that you are being charged a rate of interest that is high, and the bank has mentioned that your CIBIL Score is not up to the mark, you might feel that postponing the decision to take the loan is best in that situation. This is because you would find it appropriate to build up your credit score first and then take up the loan. But, the best option in such a scenario is to clear off your outstanding debt as soon as possible. One thing you should avoid is not making frequent enquiries for the application of loan to many banks simultaneously.
How Are CIBIL Scores and Interest Rates Interrelated
1. A loan comprises of two main parts i.e. principal and interest. If the interest is very high, the EMIs will also be very high. If the interest is low, the EMI will also be low.
2. Basically the CIBIL score of an individual is considered determines how much interest banks will charge you. If it is below 750, the banks will consider the creditworthiness of an individual to be poor. In this case, it will be considered risky to provide loan to such an individual. It might also happen that the bank has refused to grant the loan.
How to Improve CIBIL score
If you are an individual who has been given a loan at a higher interest rate, then you need to check your CIBIL Score as well as report, so that you can understand why the interest rate is high. The most obvious reason would be that you will have outstanding repayments on your credit card or you have failed to make your loan repayments on time. The second reason could be that your credit utilization ratio is highThe third reason could be that you have made many hard inquiries on a frequent basis in a short span of time.
Steps to Be Taken for Paying Lower Interest
1. You need be thoughtful prior to making an application to the bank from whom you have planned to take a loan.
2. It is necessary that you start checking the CIBIL Score and CIBIL Report continuously 6 months before you have applied for the loan. This will help you understand the exact requirements that would be needed to maintain a good CIBIL Score.
3. You should apply for a loan only when you are sure that you have a good CIBIL Score and there is nothing missing in the Credit Report.
If you have a high CIBIL score, the loan application requested by you will surely be approved and you will also get the loan for a lower rate of interest.
Eventually one should clearly understand that the bank that have been approached for a loan, will always check the CIBIL Score as doing this is an important concept that should be considered while the sanctioning of a loan. Recently it has been announced that the borrowers will now have facility to get a free credit report once in a year. Every individual can make proper use of this opportunity so that the monitoring of a credit report is done on a regular basis.
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