As banks are increasing their interest rates on loans, EMIs are getting higher and the stress on the household budget is increasing. Now, the borrowers are looking for cheaper loan options. Here’s a way to get a relatively cheaper loan — good CIBIL score. The score indicates the creditworthiness of a borrower. Know in detail how it helps in getting a cheaper loan and how a good credit rating score can be maintained:
CIBIL Score and Interest Rates On Loans
CIBIL Score is a credit rating assigned to borrowers by company TransUnion CIBIL. The score is a three-digit number and ranges from 300 to 900. The higher score you have, the better it is. Generally, a score above 750 is considered good where the chances of loan approval become higher. The score shows the creditworthiness of a borrower, which helps the lender minimise the possibility of a loan default.
Lenders offer their interest rates based on the CIBIL score of the borrower. For instance, The lowest interest rate on home loans that SBI is now offering to borrowers is 7.55 per cent per annum. For this, a borrower will also require a CIBIL score of 800 or above. Those having a CIBIL score of 750-799 will be offered 7.65 per cent interest rate. For those with 700-749 score, it will be 7.75 per cent; for 650-699 score, it will be 7.85. And, those having a CIBIL score between 550 and 649, the home loan will be the costiest at 8.05 per cent interest.
How to Maintain A Good CIBIL Score?
Exhaust Your Credit Card Limit Only Up To 30%: Always keep the credit card spend up to 30 per cent of the card limit. Get a credit card with a higher top limit if you are struggling to stay within the existing limit of the card. The credit utilisation ratio should be limited to 30 per cent to have a good CIBIL score.
Never Default On Credit Repayment: Always remember not to default on any credit repayment, whether it’s loan or credit card. Default takes a heavy toll on credit ratings of an individual. If you want to maintain a good CIBIL score, this is the first and foremost thing. Pay within time and never delay. Repayment of loans or credit card dues has a very big impact on your CIBIL score.
Diversified Loan Products: It is better to diversify the loan portfolio with a good mixture of both secured and unsecured debt in order to get a high CIBIL score. A credit card is an unsecured debt, whereas a home or vehicle loan is a secured debt.
To control inflation, the Reserve Bank of India (RBI) in early June raised the key repo rate by 50 basis points (bps), which was the second hike within almost as month after the central bank’s Monetary Policy Committee increased 40 basis points in off-cycle policy review in May. The retail inflation in May stood at 7.04 per cent, which is higher than the RBI’s target limit of 2-6 per cent.