A low CIBIL Score has several disadvantages, including the possibility that your loan application may refuse right away, that you will have to wait longer than usual, that further documentation will require, and that your loan will have a higher interest rate. A poor CIBIL score affects you in a variety of ways, whether you are aware of it or not. Your CIBIL score may be low due to poor repayment habits or an undiscovered flaw in your credit history. As a result, it is recommended that you examine your free CIBIL score and report on a regular basis to guarantee that there are no errors.
List of Disadvantages
A poor CIBIL score has a number of disadvantages. If you have a low CIBIL score, you may face a slew of problems, from exorbitant interest rates to loan denials. Some of the disadvantages of having a low CIBIL score are as follows:
Loan Application Rejections
When you apply for a loan, your CIBIL Score is one of the first and most crucial variables reviewed. Of course, additional factors such as your salary, existing debts, and employment status are considere when applying for a Home Loan. However, whether you’re seeking a personal loan or a credit card, your CIBIL score is one of the most essential factors in determining whether your loan application will grante or denie. In times of financial hardship, personal loans are frequently requeste, thus rejecte may painful. Receiving a loan rejection during a tough period may be excruciating. Receiving a credit card refusal, on the other hand, may worsen your CIBIL score. In contrast, your CIBIL Score is as a direct measure of your creditworthiness. It also reflects how likely you are to repay the debt. As a result, no lender will lend to someone who has a poor credit history.
The Interest Rate is Really High
While some banks may refuse to lend to you due to your low CIBIL score, others may. To compensate for the higher risk of lending to you, they may agree to lend at a higher interest rate. However, if you have a high CIBIL score, you are more likely to acquire a cheap interest rate and a rapid loan approval. There is a possibility that a credit report error occurred without your knowledge, lowering your CIBIL score and forcing you to pay exorbitant interest rates on loan applications.
EMI Payments
While some lenders may provide you with a loan with a higher interest rate, others may provide you with less favourable terms, such as higher monthly payments or a limited loan amount. For example, the loan amount authorise may significantly less than what you requeste or applie for, or the loan term may reduce. A shorter loan term with the same loan amount would result in higher EMIs. A greater down payment may also necessary for your loan to approve. If your CIBIL score is high, you may be eligible for cheaper EMIs and a longer loan term. Candidates with low CIBIL scores, on the other hand, are unlikely to get hire.
Although there are more drawbacks to having a low CIBIL Score, these three are the most significant. These are the most severe consequences of a low CIBIL score. Aside from that, there are a number of other disadvantages that vary per lender. To prevent such disadvantages, set up a CIBIL score login to monitor your score and keep it as high as possible before applying for a loan or credit card. Given these drawbacks, you should work on improving your Low CIBIL Score before applying for a loan or credit card.
