Repay Loan Instalments On Time, Pay Less Next Time

You may soon be able to negotiate lower interest rates on loans offered to you by banks and non-banking finance companies.
Have you always been paying your personal loan instalments on time? Never defaulted on your credit card bills?
 
Good. You may soon be able to negotiate lower interest rates on loans offered to you by banks and non-banking finance companies (NBFCs).
 
But those who default, beware: you may have to shell out far more for everything, from personal loans to home loans and insurance premia.
 
The Credit Information Bureau of India Ltd (Cibil) has launched a rating system based on the gigantic amount of data on personal loans that is in its possession.
 
Cibil maintains a database on the credit history of over 135 million individuals and companies. It will now provide personal loan scores ranging between 300 and 900, where 900 indicates a good borrower.
 
This score is referred to as the Cibil TransUnion Personal Loan Score and a bank or NBFC can access this score through Cibil.
 
“Earlier, there was no objective mechanism to distinguish a good personal loan borrower. But with the personal loan score, individuals may be able to get lower interest rates for a good score,” said Satish Pillai, general manager, analytics and decisioning services at TransUnion, a stakeholder in Cibil.
 
The personal loan score is based on the amount of loans you have pending with other members of Cibil, your repayment track record, the number of enquiries that banks have made on your credit history, the amount of loans you have given up repaying (defaulted on), your credit card repayments, and in case there are any suits filed or loan write-offs.   But if you are wondering how you will get to know your rating then you will have to wait. 
 
“By the end of this year we will be ready with the infrastructure to provide individuals their own credit score,” says Arun Thukral, Cibil managing director.
 
Once you know your credit record, you can negotiate with a bank to give you better rates. Of course, the bank would have many other parameters to take a decision, but repayment capability would be a major criterion. 
 
This score will be available to all 165 member banks of Cibil and other financers to help them weigh the chances of a borrower defaulting on a loan.
 
Thus, if a bank gets an application from a person and finds that his personal loan score is 890, then it would be willing to welcome such a quality customer. Personal loan interest rates offered by banks differ from individual to individual, ranging from 15 to 30%, with some NBFCs charging up to 48%, as per industry estimates.

Credit Sudhaar is India’s first Credit Health management & improvement company whose goal is to help clients to Restore, Enhance and Protect their Credit and make them credit healthy.

Courtesy: DNA
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