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“You Can Inherit Your Parents Debt: Read Below to Understand How You Can Handle Them! “

Having a high credit score is essential for getting a business loan. Whatever your situation is, whether you’re an entrepreneur trying to grow your existing business or a startup with a need for capital, you can apply for a business loan. 

 

Your credit score tells lenders whether you are creditworthy and whether they can accept your loan application. Here we will go over the significance of credit scores and their calculation. Most importantly, we will explain how to raise your credit score to become eligible for a business loan.

One of the key elements that influence your credit application approval or denial is your CIBIL score. A low CIBIL score can be a significant obstacle for people who need credit immediately. Even a high credit score might make it comparatively simpler for you to receive a credit card or loan. 

Receiving credit cards with additional advantages and loans with comparatively cheaper interest rates can both be facilitated by having a high credit score. The majority of lenders reject credit applications from candidates with low credit scores (600 or lower). The loan applicant must pay interest at higher rates even if their application is granted.

You should pay close attention to the following guidelines if your CIBIL score is low: Additionally if you want to raise it to get loans, read it completely.

Be Mindful of the Significance of Your Credit Score

Let’s start by clarifying credit scores and discussing their significance. Your credit score is a number that indicates how creditworthy you are based on several variables. These include the duration of your credit history, how much debt you have taken on, and your payment history. It gives lenders a general idea of your credit management prudence.

In India, credit ratings fall between 300 and 900; higher scores denote greater credibility. A credit score of 650 or above is usually preferred by lenders when evaluating applications for business loans. Thus, it’s critical to keep your credit score high to improve your chances of having a loan authorized on terms that suit you.

Why Is CIBIL Score Important for Loans to Businesses?

For a Business Loan, a CIBIL Score is Important for the Following Reasons:.

  • Credibility Analysis: CIBIL scores determine how creditworthy a business is and impact the likelihood that a loan will be approved.
  • Interest Rates: A higher CIBIL score can result in cheaper interest rates, easing the financial load.
  • Loan Approval Process Accelerated: A high CIBIL score expedites the loan approval process.
  • Loan Limits: Higher credit scores enable individuals to borrow large sums of money, which encourages company expansion.

CIBIL score is one of the vital criteria used to determine loan acceptance. The interest rate, loan restrictions, and viability of MSME loans are influenced by the CIBIL score.

 

Best Business Loan Offers in 2024

Loan Provider R.O.I (Reducing Per Annum) Processing Fees Loan Amount CIBIL Score
HDFC Bank Business Loan (Small) 16% – 20% 1% – 2% 1.00 Lacs – 10.00 Lacs 700
Poonawala Finance Business Loan 18.75% – 20% 2% – 4% 2.00 Lacs – 10.00 Lacs 700
Bajaj Finserv Business Loan (Small) 21% – 24% 2% – 3% 1.50 Lacs – 30.00 Lacs 720
Tata Capital Business Loan (Small) 22% – 25% 3% – 4% 1.00 Lacs – 15.00 Lacs 675
Lendingkart Business Loan 21% – 40% 3% – 4% 1.00 Lacs – 1.00 cr 600
Incred Business Loan 16% – 33% 2% – 5% 50.00 k – 10.00 Lacs 650
Flexi Business Loan 18% – 30% 3% – 4% 1.00 Lacs – 25.00 Lacs 700
Indifi Unsecured Business Loan 18% – 30% 3% – 4% 1.00 Lacs – 30.00 Lacs 700
PaySense Business Loan 18% – 22% 2% – 6% 50.00 k – 10.00 Lacs 700
Ayefin Business Loan 28% – 29.5% 2.5% – 3% 5.00 k – 3.50 Lacs 650
Faircent Eazzy Loan 25% – 30% 7% – 8% 50.00 k – 1.50 Lacs 630
Money View Business Loan 16% – 36% 2% – 5% 5.00 k – 5.00 Lacs 650
Hero Fincorp Business Loan (Small) 19% – 27% 2% – 4% 1.00 Lacs – 5.00 Lacs 630
Faircent Business Loan 25% – 30% 7% – 9% 50.00 k – 10.00 Lacs 550
Ambit Finance Business Loan 20% – 28% 3% – 3.5% 2.00 Lacs – 50.00 Lacs 675
Choice Finserv Business Loan 22% – 26% 2% – 3% 1.00 Lacs – 7.50 Lacs 700
Get Vantage Business Loan 16% – 20% 5% – 8% 5.00 Lacs – 10.00 cr 700
Recur Club Business Loan 16% – 20% 2% – 3% 10.00 Lacs – 10.00 cr 650
MAXEMO Business Loan 22% – 30% 4% – 8% 5.00 Lacs – 30.00 Lacs 650
ARKA Business Loan 18% – 20% 2% – 3% 1.00 Lacs – 30.00 Lacs 700
FINAGG Supply Chain Finance 18% – 20% 2% – 3% 1.00 Lacs – 50.00 Lacs 700
Stashfin Business Loan 2.45% – 4% (Fixed Monthly) 1% 10.00 k – 5.00 Lacs 725
HDFC Bank Business Loan 16% – 18% 1% – 2% 1.00 Lacs – 75.00 Lacs 700
ICICI Bank Business Loan 16% – 18.5% 1.5% – 2% 10.00 Lacs – 1.00 cr 700
Yes Bank Business Loan 16.5% – 19.5% 2.5% – 4% 5.00 Lacs – 50.00 Lacs 650
IndusInd Bank Business Loan 16% – 20% 2% – 3% 10.00 Lacs – 50.00 Lacs 680
AXIS Bank Business Loan 16% – 18% 1.75% – 3% 5.00 Lacs – 75.00 Lacs 700
Kotak Mahindra Business Loan 16% – 18% 2% – 3% 5.00 Lacs – 2.00 cr 630
Deutsche Bank Business Loan 16% – 20% 2% – 3% 15.00 Lacs – 1.00 cr 680
IDFC Bank Business Loan 16% – 19% 1.5% – 3% 10.00 Lacs – 75.00 Lacs 700
Standard Chartered Business Loan 16.5% – 18% 2% – 3% 10.00 Lacs – 1.00 cr 720
Unity Bank Business Loan 16.5% – 22% 2% – 3% 10.00 Lacs – 50.00 Lacs 700
Bajaj Finserv Business Loan 17% – 20% 1.75% – 3% 5.00 Lacs – 50.00 Lacs 700
Aditya Birla Business Loan 15.75% – 20% 2% – 3% 5.00 Lacs – 50.00 Lacs 700
Aditya Birla Business Loan (Small) 23% – 29% 2.5% – 3.75% 1.00 Lacs – 10.00 Lacs 700
Tata Capital Business Loan 17% – 20% 2% – 3% 7.50 Lacs – 50.00 Lacs 700
Hero Fincorp Business Loan 18% – 21% 2% – 3% 7.00 Lacs – 40.00 Lacs 700
Piramal Finance Business Loan 16.49% – 25% 2.75% – 4% 1.00 Lacs – 15.00 Lacs 700
Poonawala Finance Business Loan 18.25% – 20% 2% – 4% 10.00 Lacs – 30.00 Lacs 700
Axis Finance Business Loan 18% – 24% 2% – 3% 1.00 Lacs – 50.00 Lacs 650
Edelweiss Business Loan 19.5% – 23% 2% – 3% 3.00 Lacs – 40.00 Lacs 700
Fullerton Business Loan 16% – 22% 2% – 4% 7.50 Lacs – 75.00 Lacs 650
Fullerton Business Loan (Small) 21% – 33% 2% – 4% 1.00 Lacs – 10.00 Lacs 700
Godrej Capital Business Loan 17.5% – 20%

 

How to Raise Your Credit Score: A Few Helpful Steps

Now that we know how important credit scores are, let’s look at some easy steps you may take to raise it:

  • Never Neglect Timely Payments

How can credit scores be raised? Keeping your credit score high requires timely bill payments. Your corporate credit score as well as your credit score may suffer from late payments. Make sure to pay your EMIs, credit card bills, and other bills on time.

  • Maintain Your Credit Utilization Ratio Low  

The percentage of your available credit that you are now using is known as credit utilization. To demonstrate appropriate credit management, you should always maintain your credit use below 30%. For instance, if your credit limit is ₹1 lakh, attempt to keep your balance under ₹30,000.

  • Take out Loans From a Variety of Lenders

Your credit score can be improved by having a variety of credit accounts. To assess your capacity to manage various forms of debt, lenders want a combination of installment credit (such as SME loans) and revolving credit (such as business credit cards). Sustaining a steady payment record across multiple credit categories demonstrates your financial ability.

  • Timely File Your GST and Other Taxes

When determining your financial standing, lenders also take into account your timely submission of GST and other taxes. It is easier for lenders to assess loan applications when you file your taxes regularly since they will obtain reliable information about the sales and revenues of your company. It also guarantees that your financial transactions are transparent.

  • Minimize Hard Inquiries

When prospective employers or financial organizations look up your credit report, they make a hard inquiry. A few hard queries here and there might not have a big effect on your score. Several hard inquiries in a brief window of time can worry lenders. They can see this as proof that you are having financial troubles. Keep your score from being negatively impacted by needless, harsh queries.

  • Check Out your Business’s Credit Report

Keep a regular eye out for any mistakes or inconsistencies in your company’s credit report. Minor errors might have an impact on the credit rating of your business. Periodically looking into the report will allow you to spot any errors and take quick corrective action.

You now understand how to raise your credit score by implementing the recommendations provided in this guide. Never forget how important your credit score is. Pay your bills on time, limit hard queries, diversify your credit alternatives, file taxes regularly, and keep an eye on your company’s credit record.

  • Look for Secured Credit Cards

Credit scores can be considerably lowered by settled credit accounts and late payments. Such applicants would not be preferred by any lender to receive a credit card or loan. Before asking for the loan product, you will need to raise your credibility by rebuilding your credit score.

You may choose a secured credit card instead of a set deposit in such circumstances. The secured credit card application will be approved quickly because the credit score is not taken into account. Once it’s been granted, you may begin repairing your credit by using it carefully and paying your bills on time. Even if it does not rise right away, your credit score could still be beneficial in the long run.

  • Avoid Terminating Outdated Credit Card Accounts

Banks are more likely to trust applicants with lengthier credit histories and timely payment records. Therefore, even if you no longer use a previous credit card account, you shouldn’t have it closed. Even though it might not have a noticeable effect on your credit score right away, it can be useful later on when a lender is reviewing your loan application.

  • Keep a Close Eye on Your Joint, guaranteed, and Co-signed Loan Accounts

A co-applicant with superior credibility may be asked to co-sign or guarantee the loan if the prospective borrower fails to meet all of the requirements. This is done to ensure that the guarantor can help reimburse the remaining sum if the borrower cannot repay the loan.

When an EMI is not paid on time, the borrower’s and the co-signer’s credit scores are negatively impacted. Therefore, if you are a co-signer or guarantor, you must regularly verify to see if the loan EMIs are being repaid on time. In case there is a default in the payments, you should speak with the borrower directly about it.

  • Make Attempts to Keep a Balanced Credit Mix

Having a good balance between secured loans, such as home or car loans, and unsecured credit, such as credit cards or personal loans, is advised. Users who have more credit accounts than zero or individuals who are novices to credit are seen as more credible than those who have fewer credit accounts.

Individuals who have managed different kinds of credit accounts systematically in the past are given greater trust by financial institutions and credit bureaus. If your credit mix isn’t ideal, no financial institution will refuse you a loan or credit card nonetheless.

A Few Additional Tips for Raising Your CIBIL Score

By maintaining low credit use, paying off current loans within the time frame, and refraining from applying for too many loans, business owners can raise their CIBIL scores.

The Following Tips Will Help You Raise Your CIBIL Score

  • To show that you paid bills and EMIs within the time frame, make sure you do so.
  • By not using more credit than you have access to, you can keep your credit utilization ratio low.
  • Steer clear of making a lot of credit queries since this can harm your CIBIL score.
  • Regularly check your credit report for mistakes or inconsistencies.
  • Maintain a variety of credit types, such as loans and credit cards, to show that you manage your credit well.
  • Keep track of any modifications to your CIBIL score.
  • To ensure that you don’t forget a due date, set up an auto-payment reminder.
  • Speak with your creditors about your options for payment arrangements if you’re having financial difficulties.

 

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