As a personal loan is unsecured in nature, you don’t need to provide any collateral to the lender for availing it. However, lenders need to check your credit health and make sure you have the ability to repay the borrowed sum.
However, apart from the general eligibility criteria you that you will be required to fulfil, you will also need to have a good CIBIL score for your personal loan application to be approved.
How much CIBIL score required for personal loan?
A CIBIL score range between 300 and 900. You should ideally have a score that is closer to 900 as it helps you get better deals on loans and credit cards. Generally, a CIBIL score of 750 and above is considered as ideal cibil/credit score by majority of lenders. You can get a personal loan with a CIBIL of 750 and above. As per CIBIL data loans get approved if the score is more than 750.
Lenders need to be sure that you have the ability to repay the borrowed sum before they approve your loan application. Your credit score helps assess your risk of default. If you have a high score it suggests you have been a responsible borrower and paid your credit card bills and EMIs on time. A lower score increases your risk for defaulting on the loan.
Personal Loan With Low CIBIL Score Along With CIBIL Score Less Than 550
Most lenders will reject the personal loan application if your CIBIL score is less than 550. A low CIBIL score will indicate that you are not financially stable and will find it difficult to repay the loan. Few lenders do provide personal loans for a low credit score. However, the interest rates will be high. It is important that you check the terms and conditions and compare the charges and interest rates before availing the loan.
Factors Affecting CIBIL Score or CIBIL Credit Scores:
There are many factors that affect credit scores, either positively or negatively.
- Factors that affect credit scores positively
- Making timely payments towards credit cards.
- Paying loan EMI’s on time.
- Paying not just the minimum due but the entire outstanding balance.
- Factors that affect credit scores negatively
- Non-payment or late payment of credit card bills and loan EMIs
- Maxing out credit cards or consistently using more than 75% of the credit limit.
- Paying only the minimum due on credit cards; the remainder is still considered overdue.
- Possessing too many lines of credit especially unsecured forms.
4 Surprising Ways Your Credit Score Impacts Your Loan
Your Credit Score plays a significant role to play in the approval of your loan application. Let's check your score for free in less than 3 minutes and understand its powers.
- Crucial Role
- Past Matters
- Loan With No or Low Credit Score?
- Error-Free Credit Report
When applying for a loan, your Credit Score is as important as your employment history, salary, and other eligibility factors. Make sure your score is at least above 750. 800 is a great number!
One of the parameters for a loan approval is the repayment history of the applicant. How do they find it? By checking your Credit Score. Good repayment history = good Credit Score.
This may be possible but be prepared for a longer processing time as banks will put in some additional checks. Moreover, you might not always get the best deal.
Sometimes errors can make their way into a spotless credit report and mar your lovely Credit Score. Give your report a glance before submitting your loan application to rule this out.
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3 things you should do before applying for a loan
- Check your CIBIL score:
It is important to learn about your credit health before applying for a personal loan. You should check CIBIL score as it will give you an idea of where you stand in terms of your credit history and repayment. If your CIBIL score is low, you can take time to work on it and gradually increase it by taking the right measures.
- Get your CIBIL report for free:
You can visit the official website of CIBIL and claim your free report if you haven’t already this year. The Reserve Bank of India (RBI) made it mandatory for all the credit bureaus in the country to offer one credit report for free per calendar year. In addition, you can also buy your CIBIL report for a one month, six months, and one year.
- Browse and shortlist lenders:
Once you have decided to take a personal loan, you will need to look for lenders that are offering good deals on their loans. It is better to browse for deals and select one that is most favourable to you. As a result of high competition, many banks are offering competitive interest rates on personal loans. Look out for the best deal that will offer you maximum benefits in terms of interest rate and tenure and fringe benefits such as processing fee waiver.
- Apply only with a few lenders:
After shortlisting lenders that are offering the loan suitable to your needs, you should apply only with a few lenders. You should be careful and avoid making multiple applications at the same time as this will trigger multiple hard inquiries. Several hard inquiries will have a negative effect on your CIBIL score.
How to Check Your CIBIL Score
CIBIL has provided for individuals to get their credit reports online. To apply for your credit score, just follow the following steps.
- Go to the CIBIL website and open the application form.
- Fill in the necessary details. These will be identifying information such as your name, ID details, date of birth etc.
- Enter your contact details i.e. phone numbers and postal address.
- Pay the nominal charge for the report.
Once you have completed all the formalities and made the relevant payments, CIBIL will get in touch with you and provide you with the CIBIL Score.
What if you don’t have a CIBIL score?
Your CIBIL score works like a report card for your credit status. It is calculated after taking into consideration several factors like credit history, repayment behaviour, and type of credit, among others. A long credit history makes it easier for lenders to take a sound decision about offering you a loan. However, if you don’t have a CIBIL score, the lenders will take into consideration other factors such as age, income, and job stability to evaluate your creditworthiness.
Having a CIBIL score makes it easier for you to get access to credit products. Here are a couple of ways in which you can start working on building a credit history:
- You can apply for a secured credit card which is issued against a fixed deposit. You can use it just like a credit card and pay the bills on time to improve your CIBIL score.
- Generally, companies have partnerships with banks for its employees. You are more likely to get approval on a credit card from a bank that has an existing relationship with the company you are working for. You can then use your credit card for a few months following which you will have a CIBIL score. Make sure you are paying the bills on time to get a good score.
It is important to note that lenders also look at other factors when approving or rejecting your personal loan application. A good CIBIL score alone isn’t enough to get approval on your loan.
A simple thing like a CIBIL score is all that could stand between you and your bank while availing a personal loan. Contrary to popular belief, it is not difficult to maintain a good CIBIL score. All you have to do is be responsible with your money and manage your credit cards and loans properly.
Know here: How to improve your CIBIL Credit Score
5 Factors that can help improve a CIBIL score for a Personal Loan:
- Bank Balance: A good bank balance shows a person's capacity to repay a loan. This increases the chances of getting a loan approved.
- Good income source: A stable income shows that you are capable of repaying the loan. This has a positive impact when you apply for a loan even if you have a low CIBIL score.
- Guarantor: Having a guarantor with a good CIBIL score who will sign for you will increase your chances of getting a personal loan if you have a low CIBIL score.
- Reduce the quantum of loan: You may get a loan of a slightly lesser amount with maybe a higher rate of interest if you don't have a minimum CIBIL score for personal loan.
- Regular payments: Repaying outstanding dues, taxes and debts on time will help you build a better CIBIL score. This would take some time but would surely aid in getting a loan granted.
Know More in CIBIL:
- CIBIL score for Axis Bank Personal Loan
Member banks of credit information agency, CIBIL, stipulate credit scores as part of their loan eligibility criteria. A good credit rating gets you the best rates on unsecured loans. Do you know CIBIL Score for Axis Bank Personal Loan
- CIBIL score for ICICI Bank Personal Loan
If you need funds quickly, ICICI Bank is the place to go. Hassle-free disbursal, attractive interest rates and flexible repayment options all form part of the bank’s loan offerings. Do you have the right CIBIL Score for ICICI Bank Personal Loan
- CIBIL score for HDFC Bank Personal Loan
HDFC Bank is the preferred banking partner of thousands of loan seekers all across the country. If you want to a part of its personal loan community, you will need to have the required CIBIL Score for HDFC Bank Personal Loan
Personal loans are granted by different banks based on different types of criteria. Most banks favor customers with a 700+ CIBIL score. However, in case of debt consolidation and balance transfer requests, banks may lower their CIBIL score criteria while compensating it with the interest charged from customer.
In case you do not have a CIBIL score then banks will be outright reluctant to entertain your personal loan request. For such customers the only options that remain would be to avail loan from a cooperative bank or a private lender or from some family member or friend. However, it is always advisable to build up a good credit score so that you do not need to go to private lenders and cooperative banks which do not guarantee any safety of your money. Customers with no credit score can also secure loans against any asset like gold jewellery or property.
In case of low CIBIL score either customers can wait and improve their score before applying for credit or they can avail personal loans at a much higher rate of interest. However, the former is a much better choice than getting caught in the vicious circle of large amount of debt.
The loan amount and duration for personal loans may differ depending on the lender and the borrower's repayment ability. The loan amount can start from as low as Rs. 10,000 and go up to Rs. 30,00,000.
As it is a short-term loan, the repayment options are flexible and can range from 12-60 months, depending on the lender and also on the borrower's credit history.
The interest rates for a personal loan depend on factors such as the amount borrowed, the borrower's credit history, and the lender's policies. Therefore, it varies from borrower to borrower and lender to lender. To get an idea of the interest rates you are eligible for, you can check your CIBIL Score and Report on BankBazaar or myCIBIL. Participating banks may offer special interest rates and other features based on your CIBIL Score and other parameters.
There are other fees and charges associated with a personal loan that borrowers should be aware of. Processing charges typically range from 2% to 3% of the loan amount and vary from lender to lender. In case you decide to prepay your loan before the loan tenure, you may be charged a prepayment fee of around 2% to 3%.
The time taken to sanction a personal loan may differ from one lender to another. It can range from as quick as 24 hours to as long as seven business days, depending on the borrower's credentials and the lender's processes.
It is essential to exercise caution while applying for a personal loan. Borrowing beyond your repayment capacity can lead to long-term financial difficulties and negatively impact your credit history and CIBIL Score. Personal loans typically have high-interest rates, so it is advisable to conduct thorough research and carefully evaluate the costs and benefits before choosing a loan.
