Credit score is the number that shows your credibility as a borrower. It generally ranges anywhere from 300 and 900, which helps predict your chances of making the loan repayments on time and in full. A higher score enhances the chances of loan approval at lower rates.
When determining whether to approve a credit option, lenders factor into account your credit score, which is computed by reviewing various parameters like credit repayment past record, credit card usage and outstanding loan amount. Here in this blog covered are the benefits of a good score when it is about securing a loan option.
How can a strong score assist in availing credit?
Lenders tend to review your score to see if it is risky to offer you the proceeds. If you hold a strong score, it is simpler to avail loan approval and you require paying less interest constituent. Individuals with a high score are looked upon as less risky and are way better at performing timely payments. However, in the case, you have a low score, you may not get the proceeds, or you may have to pay a higher interest constituent as there’s a higher probability you will not pay the same back timely.
Holding a strong TransUnion CIBIL score is not only helpful for availing loan approval and a lower rate of interest, but you also even get higher power to negotiate well on the terms and conditions like a lower rate of interest or higher repayment tenure. To maintain a strong score, ensure to make the payment of the dues in full and on time, use the credit in a responsible manner and periodically check up on the credit report to detect any mistake or error. Here are some of the crucial ways in which holding a strong score can assist you to secure loan proceeds on time.
Also, note that as the CIBIL score is crucial for future credit approval, you must ensure to check CIBIL score by PAN card for free by visiting online lending marketplaces for monthly updates on your credit. Doing so would allow you to understand where you stand credit-wise and if any steps you must take to improve your credit score.
Higher approval chance
When determining whether to approve the loan, lenders view a strong score as proof that the borrower is most likely to repay the full loan proceeds on time. So, holding a strong score can ameliorate your chances of availing loan approval.
Lower rate of interest
Lenders might provide a lower rate of interest to you as a borrower with a strong score as they are viewed as less risky. Doing so saves you money over a long time period.
Faster loan processing
Lenders might prioritise you if you have a strong score as this shows your lower credit risk. This may lead to quicker loan processing as well as approval.
Higher negotiating power
Holding a strong score may endow you with the leverage when negotiating for the best terms and conditions, permitting you to negotiate for a better rate of interest, processing charges and repayment tenure.
Better loan conditions
If you are a borrower with a strong score, then you may be eligible for suitable terms and conditions like longer repayment terms, bigger loan proceeds or lower charges. Overall, holding a strong score can considerably enhance your chances of securing a wonderful loan deal and getting the best terms and conditions on a loan.
Impact of a low score on the loan application –
A credit score below 750 significantly hampers loan approval. Explore informational blogs for insights into its impact on loan applications. Factors include higher interest rates, lower loan amounts, and potential rejection. Understanding these implications is crucial for improving creditworthiness and securing favorable loan terms.
Tough getting loan approval
Low scores make it tough to get loan approval.
Higher rate of interest
Lenders might levy a higher rate of interest owing to the persistent risk of lending to one with a low score.
Restricted loan options
You might have lesser loan choices and might require relying on the subprime lenders offering less suitable or favourable terms and conditions on loans.
Smaller loan proceeds
Lenders might require offering a lower loan proceed, restricting your potential to mitigate considerable financial requirements.
Security needs
Low credit might necessitate offering security or asset or adding a co-signer to the loan for security purposes.
Poor impact on the future credit
Late payments and loan rejections can damage your credit, which may make it tough to access favourable terms on loans in upcoming times.
Ameliorating your score over time is important to increase your loan eligibility chances and to secure a better deal on a loan.
What’s the impact of poor and good scores on loan application procedure?
A strong score can considerably enhance your chances of availing a loan at favourable terms and conditions like a lower rate of interest and bigger loan proceeds. On the contrary, a poor score can restrict your loan choices, resulting in a higher rate of interest and even necessitating security or adding in a co-signer for a better loan deal.
| Particulars | A good score of 750 and above | A poor score of below 750 |
| Collateral or cosigner | Usually not required | May require security or adding a co-signer to secure a loan deal |
| Future credit | Has a positive impact, and is simpler to access the loan in upcoming times | Negative impact and is difficult to secure a loan at suitable terms and conditions. |
| Loan amounts | Higher loan proceeds | Lower loan proceeds |
| Loan option | Can access suitable terms | Restricted loan choices as it depends on the subprime lenders |
| Rate of interest | Lower rate of interest | Higher rate of interest |
| Loan approval | Higher loan approval chances | Tough to avail loan approval owing to the low credibility |
How can you improve your credit score?
In the case your score is fair or low, ensure you carefully follow the list –
- Set reminders to make sure you do not miss out on any credit repayments.
- Keep your previous credit cards in excellent standing to maintain a good credit record.
- Keep thorough track of your card limit to assess your spending.
- Borrow from a wide range of line of credit to secure a lower rate of interest and bigger loan proceeds.
