You have probably heard of CIBIL scores more times than you can count

You have probably heard of CIBIL scores more times than you can count

But, did you know what these scores mean?

Your CIBIL score is essentially a numeric representation of how creditworthy you are and ranges between 300 to 900. When lenders provide loans, your interest rate, repayment term, etc., are determined by how risky the lenders perceive you to be.

If your score is high, i.e., above 750, then the lenders consider you to be someone who will repay loans on time and therefore present less risk. Therefore, you will be able to avail loans at lower interest rates.

How is CIBIL Score Calculated

Your credit score is based on multiple parameters such as your repayment history, type of credit availed, repayment duration, existing debt, credit utilization ratio, credit enquiries, etc. All of these will have an impact on your credit score.

Your CIBIL Score Decoded

Curious to find out your creditworthiness? Your CIBIL score can tell you that. Here’s what these scores really mean –

300 to 599 – Poor

It is time to pull up your socks and turn around your financial habits because they could cost you dear in the long run. Such scores are a result of either defaulting on loan payments, settling your loan, opting for multiple loans at the same time or having an extremely high credit utilization ratio.

These scores make it hard to avail loans and most lenders do not provide loans to borrowers with such low scores. Even if they do, the interest rates and repayment terms will be very strict and not to the your advantage at all.

Note: If you do not have credit history or are new to the system, your credit score will probably be reported as N/A. While this is not looked at negatively, not all lenders provide loans to first time borrowers. “You have probably heard of CIBIL scores more times than you can count” の続きを読む

What Does Personal Guarantee Mean for a Business Loan?

What Does Personal Guarantee Mean for a Business Loan?

If you are looking to get your hands on a business loan for either a startup or a current business, you may have heard the term personal guarantee before. This article will help clarify what a personal guarantee is, along with some of the pros and cons associated with it.

What Is a Personal Guarantee?

The term personal guarantee is used within a legal loan agreement between lenders and business owners. The term is used to ensure repayment of business loans or lines of credit in the form of personal assets. They do not typically require specific collateral, which makes them easier to get.

In a typical scenario, these types of agreements are used for small businesses or startups who have inadequate credit history for a business loan. To increase the chance of approval on an application, a personal guarantee acts as a co-signer to a business loan. In the case that a business fails and your loan defaults, you are the guarantor, and the lender has the right to come after your personal assets.

Different Types of Guarantees

There are a few different types of personal guarantees. The most common one used is an unlimited personal guarantee (unconditional guarantee). This would mean that borrower is responsible for the full amount of the loan repayment, plus any legal fees. An example of this is the Small Business Administration’s loan program. Many SBA loans require unlimited personal guarantees from any of their borrowers with 20% or more stake in a business.

Additionally, there are limited personal guarantees, which are more flexible and lenient. This type of guarantee sets a limit on the amount of money a lender can come after a borrower for in the event of business default. “What Does Personal Guarantee Mean for a Business Loan?” の続きを読む