Here’s what you can do for cheaper credit

As banks raise interest rates on loans, EMIs rise and pressure on household budgets increases. Now borrowers are looking for cheaper loan options. Here is a way to get a relatively cheaper loan – a good CIBIL score. The score indicates the creditworthiness of a borrower. Know in detail how it helps to get a cheaper loan and how to maintain a good credit score:
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. Generally, a score above 750 is considered good where the chances of loan approval become higher. The score shows a borrower’s creditworthiness, which helps the lender minimize the possibility of default.

Lenders quote their interest rates based on the borrower’s CIBIL score. For example, the lowest interest rate on home loans that SBI now offers to borrowers is 7.55% per annum. For this, a borrower will also need a CIBIL score of 800 or higher. Those with a CIBIL score of 750-799 will be offered an interest rate of 7.65%. For those with a score of 700 to 749, it will be 7.75%; for a score of 650-699, it will be 7.85. And, those with a CIBIL score between 550 and 649, the home loan will be the most expensive at 8.05% interest.
How to maintain a good CIBIL score?

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

Never default on loan repayment: Always remember not to default on any credit repayment, whether it is a loan or a credit card. Failure to pay weighs heavily on an individual’s credit rating. If you want to maintain a good CIBIL score, this is the first thing to do. Pay on time and never delay. The repayment of loans or credit card dues has a very significant impact on your CIBIL score.

Diversified loan products: It is best to diversify the loan portfolio with a good mix of secured and unsecured debt in order to achieve a high CIBIL score. A credit card is unsecured debt, while a home or car loan is secured debt.

To control inflation, the Reserve Bank of India (RBI) raised the policy rate in early June by 50 basis points (bps), which was the second hike in nearly a month after the Monetary Policy Committee of the central bank rose 40 basis points in off-cycle policy review in May. Retail price inflation in May stood at 7.04%, which is above the target limit of 2-6% set by the RBI.

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Garland K. Long