Here’s what you can do to get a cheaper loan

As banks raise interest rates on loans, PMIs get higher and the strain on household budgets increases. Borrowers are now looking for cheaper loan options. Here’s a way to get a relatively cheaper loan – good CIBIL score. The score shows the creditworthiness of a borrower. Find out in detail how it helps to get a cheaper loan and how to maintain a good credit rating:
CIBIL score and interest rates on loans

CIBIL Score is a credit rating assigned to borrowers by TransUnion CIBIL. The score is a three-digit number and ranges from 300 to 900. The higher your score, the better it is. In general, a score above 750 is considered good as the chances of credit approval increase. The score shows a borrower’s creditworthiness, which helps the lender minimize the possibility of a loan default.

Lenders quote their interest rates based on the borrower’s CIBIL score. For example, the lowest home loan interest rate that SBI is now offering to borrowers is 7.55 percent per annum. For this, a borrower also needs a CIBIL score of 800 or higher. Those with a CIBIL score of 750-799 are offered an interest rate of 7.65 percent. For those with 700-749 points, it’s 7.75 percent; for 650-699 points it is 7.85. And for those who have a CIBIL score between 550 and 649, the home loan is the most expensive, at 8.05 percent interest.
How do you keep a good CIBIL score?

Only use up to 30% of your credit card limit: Always keep credit card spending up to 30 percent of the card limit. Get a credit card with a higher maximum limit if you’re having trouble staying within the card’s existing limit. The credit utilization rate should be limited to 30 percent to have a good CIBIL score.

Never default on loan repayments: Always remember not to default on any loan repayment, whether it’s a loan or a credit card. Default takes a heavy toll on a person’s creditworthiness. If you want to maintain a good CIBIL score, this is the most important thing. Pay on time and never hesitate. Loan repayments or credit card fees have a very large impact on your CIBIL score.

Diversified credit products: It is better to diversify the loan portfolio with a good mix of secured and unsecured debt to get a high CIBIL score. A credit card is an unsecured debt, while a home or vehicle loan is a secured debt.

In a bid to control inflation, the Reserve Bank of India (RBI) raised the main repo rate by 50 basis points (bps) in early June, the second hike in almost a month after the central bank’s Monetary Policy Committee hiked 40 basis points was -cycle policy review in May. Retail inflation was 7.04 percent in May, which is above the RBI’s target range of 2-6 percent.

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