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Sunday, 15 April 2012

You can Bargain for Better Loan Terms, With a Good Credit Score

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In today's fast paced economy where there is intense competition among brands and services for the consumer's attention and business, deriving the best value for your money is imperative.


Be it goods or services like insurance, telecom or banking, we now have multiple options to choose from based on our requirements.


Take for instance the credit sector where we now have several banks and financial institutions keen to provide loans and credit cards to disciplined consumers who have a healthy credit history.


Today, almost all the banks and lending institutions check the credit score and credit information report (CIR) of an applicant before approving loan applications.
A consumer's credit score has today become the most prudent indicator of his or her financial discipline and credit eligibility. Therefore, a consumer with a good credit score is most desired by lenders. The consumer can use this powerful reputational collateral to his or her advantage.


The first step is to know what your credit score is and then understand your credit health.


Since the growth of the credit information industry, the only implemented generic scoring model that has been introduced and is being used by lenders in India is the CIBIL TransUnion Score.


Through advanced analytics, this score assigns a number from 300 to 900 to a borrower based on his or her credit history. The higher your credit score (ie, the closer it is to 900), the more likely you are to get your loan application approved. The reason being, if a score is closer to 900, the loan provider will have more confidence in the individual's ability to repay the loan.

 
While each bank will have its own credit scoring cut-off based on the credit sanctioning policies, it has been observed that most banks are lending to consumers with a credit score of 750 and above.


In addition to a good credit score, lenders may also consider other critical factors like your income-to-debt ratio, your residential status, professional qualifications, etc, while deciding on your loan application. Therefore, along with a good credit score, you must also ensure that all these factors are well placed before applying for the loan. To avail of the benefits of your good credit score you should:


   Evaluate the home loan options and shortlist the ones that best suit your financial requirements.


   Ensure that all the documentation required along with the loan application is up to date and ready for provision. This may include PAN card copy, passport copy, Form 16 for the previous two years, and six months' bank statements, etc.


   Keep your latest credit report and score ready with you if the lenders require any clarifications.


   Ensure that all the documents required on behalf of the co-applicant are ready if you plan to have a co-applicant for the loan . It is also advisable to check the co-applicant's credit score, as this is also checked by the lenders.


   Approach lenders that provide loan plans you have shortlisted. Mention to them that you have a high credit score and healthy credit report and have all the documents in place. Request them to provide you the best possible terms and conditions and loan processing timelines, based on your credit score.


   Evaluate the most optimal option that provides you the best deal in the shortest possible processing time once the lenders revert to you with all the information.


Based on the information on your high credit score, there are chances that the lenders may provide you with competitive terms and conditions. Through this approach, you will be able to bargain and avail of the most beneficial home loan offer. Also, as all your groundwork and documentation is ready, you can immediately apply for the loan. Once you apply, your credit report and credit score will be checked by the lender and on re-confirmation and validation of the documentation, they may sanction the credit based on the promised terms and conditions. 

 

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  1. HDFC Top 200 Fund
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  3. DSP BlackRock Top 100 Fund
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  6. IDFC Premier Equity Fund
  7. SBI Magnum Contra Fund
  8. Sundaram Select Midcap
  9. UTI Dividend Yield Fund

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