How does the CIBIL Score affect your loan application?
This a norm wherein the banks before giving Personal Loan checks the database of all loan borrowers in the country by the Credit Information Bureau (India) Limited (CIBIL) which is called the CIBIL Score. If there has been a default in your loan payment; your loan application would certainly be rejected. Your CIBIL score ranges from 100 to 999, for instance if your credit score is 100 then your loan application might be out rightly rejected. On other hand if it is higher say 800, then your loan application would be processed faster & will be rewarded with lower interest rates & discounts in processing fee & other charges.
You can improve your credit score by repaying your loan EMIs on time and always pay the minimum payment on your credit card to avert from the bad credit score.
Reducing Interest Rate or Flat Interest Rate, which is better?
The Personal loans Interest Rates vary between 15% and 25% depending on your profile & payment ability. There are basically two types of interest Rates offered by banks which are
- Reducing Balance Interest Rate: In the Reducing Interest Rate calculation method, the interest on your loan keeps on reducing as it is calculated on the reduced principle amount which gets reduced daily, monthly, quarterly or annually.
- Flat Interest Rate: Flat Interest Rate calculation method on other hand implies that your rate of interest remains the same & is calculated over the entire loan period. The outstanding loan amount is never reduced over the loan tenure.
It is always advised to take a loan at reducing balance interest rates as the Flat rate calculation comes out to be really expensive.