What is EMI & Types of Credit Rating in India
In India, EMI or Equated Monthly Installment is a term that most people are familiar with. It is a familiar term used in the context of loans and credit facilities. Simply put, EMI is the amount that a borrower pays each month to repay a loan or credit facility. It includes both the principal amount and the interest charged on the loan.
EMIs are a popular mode of repayment as they make it easy for people to access credit facilities. They are widely used for both short-term and long-term loans. For instance, you can use EMI to repay a personal loan, home loan, car loan, or credit card debt.
Types of Credit Rating in India
Credit rating refers to the evaluation of a borrower’s creditworthiness. In India, credit rating is done by credit rating agencies such as CRISIL, ICRA, and CARE. These agencies assess the creditworthiness of an individual or a company based on various factors such as their income, credit history, repayment capacity, and more. The credit rating given by these agencies ranges from AAA (highest rating) to D (default).
Here are the top types of credit rating in India:
- Score-based credit rating
Score-based credit rating is based on the credit score of the borrower. The credit score is a three-digit number that ranges from 300 to 900. It is calculated by the credit rating agencies based on the borrower’s credit history. The credit score is an indicator of the borrower’s creditworthiness and is used by banks and financial institutions to evaluate loan applications. A higher credit score indicates a lower risk of default, and therefore, a higher chance of loan approval.
- Personal credit rating
Personal credit rating is assigned to an individual and is based on their credit history, income, and other factors. This rating is used by banks and other lending institutions to determine whether the individual is eligible for a loan, and if so, at what interest rate.
- Corporate credit rating
Corporate credit rating is assigned to companies and is based on their financial condition, debt profile, credit history, and other factors. This rating is used by banks and other financial institutions to determine the creditworthiness of the company.
- Sovereign credit rating
Sovereign credit rating refers to the creditworthiness of a country. It is assigned to countries by credit rating agencies based on the country’s economic and political environment, government policies, etc. This rating is used by investors and lenders to determine the risk of investing in a country.
- Bond credit rating
Bond credit rating refers to the creditworthiness of bonds issued by companies or governments. This rating is assigned by credit rating agencies and is based on the issuer’s creditworthiness, risk profile, and the terms of the bond.
Conclusion
In conclusion, EMI is a widely used mode of repayment in India that makes it easy for people to access credit facilities. It is important to understand the types of credit rating in India to know your creditworthiness and eligibility for loans. Score-based credit rating, personal credit rating, corporate credit rating, sovereign credit rating, and bond credit rating are among the top types of credit rating in India. Understanding these ratings can help you make informed decisions when applying for loans or investing in bonds.
With the added convenience of EMI, you can convert your high-ticket purchases into small, manageable payments.
One such instrument that helps you convert your high-ticket purchases into No Cost EMIs effortlessly is the Bajaj Finserv Insta EMI Card. The Insta EMI Card comes with a pre-approved limit of Rs. 3 Lakh and offers you the flexibility to choose a repayment tenure of your convenience, ranging from 1 month to 60 months.