Learn the Importance of CIBIL Score While Availing CA Loan

Posted by Anuj Pandey on July 26th, 2018

There are various purposes for which chartered accountants require a loan. It can be starting a new CA firm, buying a home, expanding one’s existing business, financing a child’s higher education, etc. Chartered accountants can avail customised loans to suit their specific requirements. Lenders like Bajaj Finserv offer CA Loan that is an exclusive suite of four different types of loans:

• Personal Loan: For meeting a variety of personal expenses like an exotic vacation, clearing debts, etc.  

• Business Loan: One can use these advances for maintaining cash flow, working capital, etc. Such loans are a simple method of financing your CA firm.

• Home Loan: CAs can use this loan to purchase a new house. The credit granted is up to Rs. 2 Crore for chartered accountants.

• Loan against Property: One can use these loans for financing high ticket expenses like setting up a new office for business expansion, etc.

There are many benefits of availing a Bajaj Finserv CA Loan. Amongst them, the most important one is the pre-approved offers for existing customers. Besides Loans for Chartered Accountants, these pre-approved offers are also available on personal loans, business loans, home loans, EMI product financing and other financial services. It is a simple and quick procedure to avail finance. All they have to do is, provide a few essential details to access their pre-approved limit.

However, applicants first need to consider their CIBIL score or credit rating to avail a loan.  

What is a CIBIL score and why is it important for a CA Loan applicant?

CIBIL score is a proof of an applicant’s creditworthiness in the eyes of a lender. In other words, financial institutions use these scores to evaluate the credibility of a borrower. A score higher than 750 indicates higher creditworthiness of an applicant. The points below signify the importance of this credit rating.

1. Quick loan sanctioning

If an applicant’s CIBIL score is higher, lenders initiates the application process and sanctions the loan amount quickly within 24 hours. This is simply because lenders get the confidence of granting a substantial amount of credit. Also, an applicant’s CIBIL score is the first criterion that lenders consider while evaluating a loan application.

Therefore, if individuals have a high credit rating, only then will financing institutions consider the next criterion like the applicant’s income, etc. for further evaluation and processing. Lenders reject applications of prospects having a low CIBIL score in the first instance.  

2. Better interest rates

Applicants with a strong CIBIL score can secure attractive interest rates from borrowers. High credit rating allows applicants the advantage of comparison and negotiation with lenders. Additionally, good CIBIL score can allow the waiver of various processing charges and even pre-payment charges.

How are the CIBIL scores calculated?

CIBIL calculates the credit score basing on various factors like payment history, number of loan accounts, types of loan accounts held and outstanding debt. Higher the score better are the chances of availing financing from lenders.  If a chartered accountant has low credit rating, the lending institution may reject his/her CA loan application.

How can a CA improve his/her credit rating?

Following are how a chartered accountant can improve his/her credit rating.   

1. Paying off unpaid dues

An applicant must repay all his/her current dues. Unpaid dues and notably higher outstanding loan amounts pull down the CIBIL score of a prospect to a great extent.

2. Avoid applying for multiple loans

Applicants should avoid applying for multiple loans at a time. Plus, individuals should refrain from applying immediately after a loan application is rejected. This is because there are chances of multiple rejections, bringing down the credit ratings drastically.

3. Maintaining the credit utilisation ratio

Prospects should keep in mind their income to credit utilisation ratio, particularly concerning the usage of credit cards. Credit card users must limit their usages only to essential or emergency transactions. They can use two or three cards at the most for distributing their expenses.

Following the regulations mentioned above, CAs need to manage their finances better to improve their CIBIL score and increase their chances of getting a CA loan.