Faster loan approval, cheaper loans; Know how beneficial a good rating is
When applying for loans from banks or any other financial institution, the CIBIL score of the borrower is examined. The score ranges from 300 to 900. The higher the score, the better. Generally, a score above 750 is considered good where the chances of loan approval become higher.
Banks approve loans or issue credit cards only to those with a good CIBIL score. The CIBIL report contains the score and other credit details. Banks after reviewing the CIBIL report can check the repayment discipline of the borrower. It also gives an insight into the person’s credit risk profile, depending on which banks decide whether or not to grant a loan. Here is why a good CIBIL score is important and what is the benefit of a good CIBIL score:
Cheaper loans: Banks offer interest rates on loans based on the risk profile of borrowers. If a borrower’s CIBIL score is good, banks may offer a lower interest rate to those with a lower score.
Faster Loan Approval: Those with good credit ratings generally do not face delays in loan approvals. Financial institutions tend to easily approve loans to those with a good CIBIL score.
Higher credit limits: Taking large loans from banks requires a very good score as it involves higher risk. If you have a good CIBIL score, you may be offered a higher loan amount or credit limit compared to those with a lower score.
Pre-approved loans: If you have a good CIBIL score, your bank might offer you pre-approved loans or credit cards, a great way to get a personal loan fast.
Cards with better benefits: Credit and debit cards offer certain benefits and rewards. However, those with a better credit repayment history and therefore a good CIBIL score, banks offer better benefits and rewards.
In 2017, the Reserve Bank of India (RBI) made it mandatory for all credit bureaus in the country to offer a free detailed credit report per calendar year, which is available on the official website of CIBIL.
According to a report by PWC, credit card issuance in India has grown significantly at a compound annual growth rate of 20% over the past four years. The number of credit card holders increased from 29 million in March 2017 to 62 million in March 2021. It further increased by 26% and 23%, respectively, in 2019 and 2020.
According to the latest RBI data, credit growth in India continues to be driven by retail lending. An SBI research report also stated: “Interestingly, retail lending has become the main driver of bank lending in recent years and now accounts for the largest share (30.5%) of outstanding debt. credit from all regular commercial banks, replacing industrial loans (28.9% percent). Within retail, home loans have the largest share.
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