How lending is the new way of investing?
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CIBIL score indicates the capacity to pay and your past track record of loan repayments. Normally, CIBIL scores are pegged to a maximum score benchmark of 900. It is practically impossible to achieve 900 but, a score of above 700 is mandatory to be eligible for loans.
With peer-to-peer lending companies, borrowers with lower credit scores are also able to borrow but they have to pay a higher rate of interest. The CIBIL score is based on your loan repayment track record, timely repayments and the proportion of your total EMI servicing to monthly income. That is what determines your personal loan eligibility. But what if you have never borrowed and do not have a single credit card? Would you be at an advantage in getting a personal loan? The answer is an emphatic “NO”. Borrowers with no credit history will have trouble getting loans.
That surely sounds ironic, right? Here is why lenders insist on a credit history.
Even if you are financially comfortable, make it a point to start building your credit history and keep it clean. It will help later when you need to acquire assets like car / home etc.