A personal loan being an unsecured loan is sanctioned after scrutinizing the borrower’s credit history. This is where your CIBIL score plays its part. Before finally sanctioning you the loan amount, lenders check your credit scores to have a fair idea about your creditworthiness to decide whether to lend you or not.
What is the Minimum CIBIL Score Required to Avail a Personal Loan?
The minimum CIBIL Score for a personal loan is usually 750 or above. If you have a credit rating above this, you will be in a better position to qualify for getting better deals such as lower processing fees, a lower rate of interest, etc.
Your credit score helps the lender to evaluate your eligibility, decide the rate of interest as well as the maximum loan amount for which you can be eligible for. Besides checking your credit score, lenders also check certain other factors such as your age, source of income, nature of employment, etc before approving your loan application.
Why is Maintaining a Minimum CIBIL Score Necessary for Personal Loan?
As your credit score reflects your credit history and loan/Credit Card repayment habits, lenders evaluate your score to determine the following:
• Defines your credit health: Your credit score defines creditworthiness to your lender. It gives an idea about your ability to repay the debt. If you have a high credit score, it gives them assurance regarding your repayment capability. So, keep checking your credit score and report regularly to know about your credit standing.
• Enjoy speedy loan approval and other benefits: A good score will expedite the loan approval process and makes you eligible for a higher loan amount and a lower rate of interest. The loan is processed, and the loan amount is disbursed into your account in very little time.
• Avail higher loan amount: If you have a good credit score, it will make you eligible for a higher loan amount. Also, you will be in a better position to negotiate with your lender regarding the rate of interest and higher loan amount.
Tips to Improve CIBIL Score to Get a Personal Loan
If you do not have a good CIBIL score, here are the steps you need to take to become eligible for a personal loan:
• Check your credit report as well as the score to ensure there are no errors or omission of transactions. If you find inaccuracies or frauds, get it rectified by raising a CIBIL dispute before you apply for a loan.
• Pay your monthly dues on your loan EMIs and credit card bills always within the stipulated time every month to avoid the penalty charges and save your credit score from getting hurt.
• Do not max out your credit card limit and keep it up to 30%.
• If you feel you might miss out on the payment of dues inadvertently, opt for an auto-debit. This will give your lender the mandate to debit the monthly loan from your account on a fixed date every month. Remember to maintain the necessary balance in your account on the pre-determined date, so you are not charged a heavy interest due to the unsuccessful auto-debit process.
• Make sure you read the loan document thoroughly and clear your doubts before signing on the dotted line, to prevent yourself from getting nasty surprises later.
• Eliminate financial behavior that indicates risks to good credit history, like taking cash advances on your Credit Cards. This alerts lenders about you facing financial stress.
• Do not be a loan guarantor. If the borrower defaults in paying dues on time, it will not only affect your record, but you might also have to pay the debt on his/her behalf.
I hope the above-mentioned information will surely help you to know everything about the significance of personal loan cibil score and how you can improve your low credit score to apply for a personal loan.
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