Updated: Dec 21, 2021, 13:00 ISTShare:
Understanding a Credit Report.
Descriptor: Your credit report includes information on all loans taken by you, and the status of their repayment.
Your Credit Report will include:
The Credit Score
Personal Information
Contact Information
Employment Details
Details of all the previous loans.
What is the impact of a CIBIL Score when applying for a loan?
Descriptor: Your CIBIL score determines your creditworthiness and helps the bank decide if you qualify for a loan or not.
Impact of your CIBIL Score when applying for a loan
Checked by the bank offering the loan
Indicates your ability to repay the loan
Poor CIBIL Score can result in loan-rejection
High CIBIL Score improves chances of loan-approval.
How do I Improve my CIBIL Score?
Descriptor: There are ways to improve your credit score, like repaying your loans on time.
Best Ways to Improve Your CIBIL Score
Actively use a Credit Card
Repay all your loans on time
Don’t use the complete limit on your Credit Card
Pay your Credit Card bills on time
Seek to increase your credit limit
Apply for different types of loans
Regularly check your credit report for errors
Monitor your credit history and credit score.
Descriptor: Some of the factors that impact the interest rate on your loan, are the loan size, tenure, collateral, credit score, and type of employment, etc.
Factors that impact the interest rate on your loan:
|
Higher Interest Rate |
Lower Interest Rate |
|
|
Loan Size |
Smaller amount of loan |
Larger amount of loan |
|
Loan Tenure |
Shorter tenure |
Longer tenure |
|
Collateral |
No collateral |
With collateral |
|
Credit Score |
Poor credit score |
Good credit score |
|
Credit History |
Shorter |
Longer |
|
Type of Employment |
Self-employed, freelancers or hourly paid employees |
Long-term employment with consistent salary slips |
|
Co-Borrowers |
No co-borrowers |
Creditworthy co-borrowers |
|
Property Type |
Commercial |
Residential |
|
Down-Payment by You |
Smaller down-payment made by you |
Larger down-payment made by you |
Types of Interest rates (Fixed and Floating) & Comparison
Descriptor: A fixed interest rate remains the same through the tenure of the loan, while
a floating interest rate can fluctuate.
Fixed vs Floating Interest Rates
|
Fixed Interest Rate |
Floating Interest Rate |
|
Interest rate remains the same. |
Interest rate fluctuates. |
|
No impact of market fluctuations on the interest rate. |
The interest rate changes, as per market conditions. |
|
EMIs remain the same. |
Payment may vary, every month. |
|
Advantage of certainty and can plan the budget in advance. |
A good chance that interest is lower than with a fixed interest rate. |
|
Usually comes with a prepayment penalty. |
Usually doesn’t have a prepayment penalty. |
