What would you do when you need a lot of money, an amount that's way out of your affordability range? It's time like these when people turn to banks for a financial support. But do you know your odds of getting a loan is greatly dependant on your CIBIL score?
Having a good CIBIL score is important because not only bad credit personal loans are hard to get, but even when they are available they usually come at a high-interest rate.
We have established now that high credit score is important to a comfortable life. However, what's bad debt have to do with it; Let's find out.
When a person fails to repay their debt, which could be from a personal loan, home loan, etc. then they are deemed as a defaulter. Usually, in this situation, the bank proposes the option of debt consolidation, in which the loanee is allowed to repay only a portion of the actual full debt and close the case.
Although debt consolidation may seem to fix the problem on the surface, it doesn't end here. When the pending debt is "settled" then the bank closes the ledger, but the balance that remains (or the amount that's not settled) is being mentioned in the person's credit report. So, if the actual balance that had to be paid by the person was Rs. 5 lakhs, and they settled the bills at Rs. 2.5 lakhs, then the remaining 2.5 lakhs will be charged off.
The bad debt that's left in the credit report can make getting a loan almost impossible in the future, which is why you must get it removed from your CIBIL report and improve CIBIL score.
The only way you can remove bad debt is by paying the loan balance, i.e. the amount that still remains after you have paid the "settled" amount.
Follow these steps to remove the bad debt:
If you don't want to waste time looking for bad credit personal loans then resolving your debt issues is a must. Many people don't even check their credit report after settling a loan with their bank. However, they face problems when they need another loan in the future, as the history of debt consolidation is mentioned in their reports.
If you have bad debt on your report then you must get it removed by following the steps given above. Only then you can improve your score and make it easier to get loans or credit cards.