Interested in financial products
CreditMantri
Processing

How will my CIBIL™ score impact my loan interest rate?

If you have a CIBIL™ score of 750 and above, the chances of an easy loan are considered to be high. The CIBIL™ credit score usually ranges between 300 and 900. Lenders consider a higher score as better and it becomes easy to get your loan application approved if you have a high score.

With a good credit score, you can also get a loan at a comparatively lower rate of interest and on reasonable lending terms. Banks will consider you to be a creditworthy borrower who will manage the loan finances well. A high credit score means a lower probability of loan default or lower chances of missing out on an EMI.

CIBIL™ Score and Loan Interest Rates

A loan is a borrowed sum of money to be repaid in instalments to the lending institution as per agreed timelines. Loan often comprises two components - the principal amount and the interest amount. While CIBIL™ scores mostly do not determine the principal amount that you are eligible to borrow, it will influence the interest rate at which you can get the loan.

If you have a high credit score, banks consider it safe to lend you money. A low CIBIL™ credit score may result in either a loan application being rejected or a high-interest rate charged by the bank. Thus, it makes sense to check your CIBIL™ credit report and work towards a good credit score before applying for a loan.

How are interest rates determined by banks?

There are different interest rates charged on different loans. Every bank and financial institution has its own set of calculations to arrive at the right rate of interest. The CIBIL™ score is a key determinant as far as the rate of interest offered to a borrower is concerned. Many other factors such as the existing relationship with the bank may influence the interest rates.

It is advisable to borrow from a bank where you have an existing relationship. For senior citizen or those who have a different income pattern, the rate of interest may vary accordingly. A low rate of interest can be availed by applicants with a credit score of 750 and above. The lowest rate of interest is provided to applicants who have a CIBIL™ score of 850. For those who have a score of 550 or above, banks may apply the highest rate of interest or could reject the loan application. Most banks do not offer a loan to individuals with a credit score of 500 or lower.

Does a low CIBIL™ score impact loan interest rates?

A low CIBIL™ credit score can be a hindrance in getting a loan since banks will either reject the loan application or offer loans at a high rate of interest. It is ideal to avoid applying for a loan in case you have a low CIBIL™ score. A loan rejection can result in a downgrade of your CIBIL™ credit score.

Can a high CIBIL™ score lower loan interest rates?

A high CIBIL™ credit score means easy accessibility to loans and at favourable terms and conditions such as a lower rate of interest. If you are looking to apply for a fresh credit or loan, make sure that you have a high credit score before making an application. It reflects good credit behaviour and banks would be willing to lend credit easily.

Conclusion

If you don’t have a credit score close to 750, you should first work towards increasing your score before applying for a loan. Paying off all pending debts and clearing unpaid dues can help in improving the credit score. Having a clear credit report without defaults or remarks can result in a good credit score and eventually better interest rates.

Before you get ready to apply for a loan, conduct thorough research and browse for the best interest rate options in the market.

My CIBIL™ Score Impact My Loan Interest Rates FAQs

1. How does my CIBIL™ score affect my loan interest?

A higher CIBIL™ score means increased lender's confidence in timely repayments. This will help you to qualify for lower interest rates and fees on loans. A credit score under 620 can result in your loan application being rejected and the interest rates charged may be higher.

2. Can I shift to a lower rate of interest based on my CIBIL™ score?

All banks and lending institutions check the credit score of existing borrowers every year. The loan rates are adjusted accordingly. As per the loan terms and once a rate has been finalised, it remains unchanged for a minimum of one year.

3. Can I avail myself of a loan with a poor credit score?

Yes, you can apply for a loan even with a poor credit score. However, there will be higher chances of it being rejected by the bank. Such applications can result in further lowering the credit score. Also, lower credit scores will attract higher interest rates on loans.

4. What affects the interest rate on a loan?

Many factors such as bank policy, applicant’s profile, credit score, loan tenure, the extent of loan, etc affect the interest rate on a loan.

5. What is a good credit score for a low-interest rate?

A credit score of 700 and above will usually result in a lower interest rate for the borrower. While a borrower can get a loan with a credit score under 680, there could be challenges such as high-interest rates and a lengthy loan process.

Apply for a credit score

POPULAR LINKS

How Cibil™ Score Can Impact On Your Loan Interest Rate - Customer Reviews

0 / 5 (2 Reviews)
23 Jul 2020

Credit Report Analysis,Good work

15 Jul 2020

Usefulness of information,Credit Report Analysis,Website/app interface,Product offers,Good

×Thank you! Your comment will be reviewed and posted shortly.

CreditMantri will never ask you to make a payment anywhere outside the secure CreditMantri website. DO NOT make payment to any other bank account or wallet or divulge your bank/card details to fraudsters and imposters claiming to be operating on our behalf.