Your credit score is a numerical representation showing your credibility as an individual by assessing your credit past record. This generally ranges from 300 to 900 and shows the likelihood of timely repayments by the loan borrower. A higher score enhances the chances of loan approval and even makes you eligible for a higher loan proceed at a lower rate of interest.
When determining whether to get loan approval, banks factor in your credit score, which is computed by analysing various parameters like your outstanding loans, credit card usage and credit repayment record. Here in this article, discussed are the advantages of holding a strong score when it is about securing a loan deal.
How can having an excellent score assist you in availing a loan?
Lenders review your score to check your credibility and risk level associated with lending you the money. In the case you hold a strong score, it is simpler to avail loan approval, which infers you require paying less interest constituent. Those with a high score are viewed as less credit risky and are way better at making timely repayments. However, if you hold a low score, you may not avail a loan or you may require paying a higher interest constituent as there’s a higher chance of you not repaying on time.
Holding a strong score may not just help in getting the credit loan approval but you may also qualify for a lower rate of interest. Also, it endows you with the power to negotiate on the loan terms like request for a higher loan repayment tenure or a lower rate of interest to repay the loan. To maintain a strong score, ensure to repay your dues on time, use your credit in a responsible manner and periodically review your credit report to figure out any mistakes and instantly get them corrected.
Mentioned here are a few ways wherein holding a strong score can assist you in securing a good loan deal –
Enhanced approval chance
When determining whether your loan must be approved, lenders view your strong score as solid proof that you are likely to make the loan repayment on time. So, holding a strong score can ameliorate your chances of availing a loan approval.
Lower rate of interest
Lenders might provide a lower rate of interest to you if your score is good as a score of 750 and above is viewed as less risky. Opting for a lower interest rate helps you save your funds over the long term.
Faster loan processing
Lenders might prioritise you if you hold a strong score, as this shows a lower credit risk. This can lead to quicker loan processing as well as approval.
Higher negotiating power
Holding a strong score can endow you with the benefit to negotiate for better loan terms, and also permits you the access to negotiate for a better rate of interest, charges, or repayment tenures.
Better loan conditions
If you are a borrower with a strong score, then you might qualify for a favourable loan term like lower fees, higher loan proceeds or higher repayment tenures. Overall holding a strong score can considerably enhance your chances of getting a loan at favourable terms and conditions.
How can you ameliorate your credit score?
In the case your score is fair or low, ensure to follow the steps listed below
- Set reminders to make sure you do not miss out on any credit repayments.
- Keep your previous credit cards in excellent standing i.e., maintain an excellent and long repayment record.
- Keep constant track of your CUR (credit utilisation ratio) to figure out your spending pattern.
- Borrow from a diverse range of credit to potentially secure a lower rate of interest and bigger loan proceeds.
- Consider going for a higher repayment tenure while availing a loan.
- Repay your existing loan before availing another one.
Note that in the case you are eyeing to avail a gold loan, then your existing gold price in India is factored in to determine the proceeds the lender may provide you on the specific day you are availing the loan. However, to qualify for any loan, may it be a gold loan or personal loan or home loan at a lower interest rate, you must have an excellent credit score.
Your credit score ranges anywhere from 300 to 900 wherein having a score of 750 and above is considered as good. To maintain a strong score, it is essential to repay the dues timely and in full, use credit responsibly, repay your credit debts and restrict hard inquiries. While a few financial institutions and banks might offer loans to borrowers with a fair to low score, eligibility requirements must be confirmed by discussing with the lender directly. Usually, it is recommended that you hold a good score to enhance your chances of availing a loan at favourable terms and conditions.
Is it possible for you to obtain a loan despite a low credit score?
Yes, a few financial institutions offer loans to those with a low score subject to specific terms. It is recommended to get in touch with the financial institution to understand all crucial prerequisites before availing a loan.
How can you get a low rate of interest on the loan?
Financial institutions provide comparatively low rates of interest on credit options to those with an excellent score. However, it is still recommended to connect with the financial institution to get a clear understanding of the overall credit approval procedure.
How can you get a loan of Rs 1 crore from financial institutions?
If you hold an excellent score, you might qualify to receive an overall loan amount of up to 80 per cent. For instance, if you place an application for loan proceeds equaling Rs 1.20 crore or higher, you might be provided with a loan approval equaling Rs 1 crore. Also, lenders evaluate your financial stability, income, repayment history and various other parameters as per their terms and conditions and policies before determining the amount you may qualify for.