The hidden cost of low creditworthiness: it's not just high interest rates on loans

If you apply for a personal loan, lenders are usually expected to have a good creditworthiness. Someone with poor creditworthiness usually does not fail a personal loan. Even if they receive a loan offer, it is usually given at a high interest rate. Therefore, it would not be wrong to say that low creditworthiness bears a hidden cost. These costs are paid in the form of a high interest rate. Apart from a higher interest rate, there are several other disadvantages. This includes the following: Hidden costs of low creditworthiness I. From loan receptions to high interest rates: As mentioned above, borrowers with poor credit values ​​generally get loans at high interest rates, even if approved. A small increase of 1% interest can last you over a long period of time. For example, if you borrow £ 5 Lakh for three years and the interest rate is 11% instead of 10%, the extra cost you would earn is £ 8,487. Ii. Personal matters, including marriages: There were cases where weddings were turned off due to poor creditworthiness. One incident occurred in Maharashtra, where a weak Cibil score of groom led to cancellation of marriage by the girl’s family. Iii. Job prospects: Although it is still not too common in India, some employers do pay attention to the candidate’s creditworthiness before giving a job offer. A poor report can show poor credibility, leading to denied job offers – even if it is not directly related to finances. Disclaimer: Mint has a fusion with fintechs to provide credit, you must share your information if you apply. These bonds do not affect our editorial content. This article only intends to educate and distribute awareness about credit needs such as loans, credit cards and creditworthiness. Mint does not promote or encourage credit as it has a set of risks such as high interest rates, hidden costs, etc.