The bank or NBFC gives you a loan based on your credit score. If your credit score is good, then you can easily get a loan even without a guarantor. Sometimes you can also get a loan at a low interest rate. The interest on the loan usually depends on your credit score.
What is a credit score?
Credit score is a 3-digit number, which shows your behavior as well as how responsibly you have paid the previous loan. The higher your credit score, the greater the chances of getting a loan. Credit score ranges from 300 to 900, but a score of 750 or above is considered the best. If your credit score is less than 650, then the bank sees you as a risky customer. The bank feels that you will not be able to repay the loan on time. To increase the credit score or CIBIL score, it is important to pay the dues on time.
Loan on 500 credit score
If your credit score is 500, it shows that you have not paid the previous loan on time. Also, you must have made many defaults. It also shows that your financial ability is low, due to which the bank or NBFC feels that there may be difficulty in recovering the loan amount from you. However, this does not mean that you will not be able to get an instant personal loan with a CIBIL score of 500. You will get many offers on loans, but the interest rate on these will be higher than necessary. In some cases, you will also need a guarantor. In such a situation, the chances of getting a loan on your terms with a 500 credit score are negligible. It is important to improve your credit score before applying for a loan. For this, pay the outstanding bills as soon as possible.
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