Your Hub for Creativity and Insights Inspire Engage flourish
Several parameters influence your eligibility for an easy Personal Loan. These include your age, income, and CIBIL score—a 3-digit number that significantly impacts your loan approval. Let us understand the significance of the CIBIL score for a Personal Loan and its impact on approval.
What is a CIBIL Score on a Personal Loan?
The CIBIL score is a crucial parameter representing your credibility. It ranges from 300 to 900. A higher CIBIL score increases your chances of approval with better terms and conditions. Loan providers use CIBIL to evaluate your loan eligibility and repayment capacity. Factors impacting your credit score include your credit history, outstanding debts, hard enquiries, etc.
CIBIL Score Ranges
The following section demonstrates the CIBIL score ranges and their meaning with status:
| Score Range | Meaning | Status |
| 300 to 599 | A high chance of rejection | Very poor |
| 601 to 700 | Challenging to qualify for a loan | Poor |
| 701 to 749 | May get approval | Average |
| 750 to 799 | Can apply with confidence | Good |
| 800 and above | Lenders prioritise such applicants | Exceptional |
Does CIBIL Score Matter in Personal Loan Approval?
Personal Loans are unsecured and do not require any collateral against the sanction. Competitive interest rates of these loans help manage finances effectively. However, lenders consider your CIBIL score when evaluating your Personal Loan application. The credit score is essential in Personal Loan approval for the following reasons:
-
- A higher credit score indicates a low risk of loan default, which makes the lender confident in approving your application.
- With a high credit score, you may qualify for a bigger loan amount. Besides, you may negotiate favourable terms with the lender, such as longer tenure and lower processing fees.
- A high CIBIL score helps you get an easy personal loan at a competitive interest rate.
Impact of CIBIL Score on Personal Loan Application
Your CIBIL score significantly impacts your Personal Loan approval. A high credit score offers these benefits:
Speedy Approval
A high score makes the lender confident about timely loan repayment. So they can approve loans quickly without further queries or documentation requirements.
Access to Easy Credit
A decent CIBIL score helps you get a loan online without visiting the lender’s office.
More Negotiating Power
An excellent credit score helps negotiate better interest rates and other terms with the lender.
Reduced Interest Rates
A higher CIBIL score lets you get a lower interest rate loan. It reduces your total loan cost and helps you save money.
Higher Loan Amount
If you have a decent CIBIL score, the lender may approve your application for a higher loan amount.
Tips to Improve Your CIBIL Score
A high CIBIL score helps you get a Personal Loan easily with better terms and conditions. So, follow these tips to improve your CIBIL score and boost your chances of loan approval:
Identify Errors in the Credit Report
If you have paid off a loan on time, but it still shows as pending in your credit report, it might be due to an administrative error. In such circumstances, you must report the issue to the credit bureau. It may include other errors in account details, personal information, etc. The agency will investigate the matter and rectify the mistake. After fixing the error, your credit score will improve.
Make Timely Repayments
Payment history is a crucial aspect of determining the CIBIL score. You can build a decent credit score by paying your dues on time. Borrow according to your repayment capacity and plan finances accordingly. Frequent non-payments reflect in the credit report and hurt your credit score. Therefore, choose your repayment plans wisely and repay regularly before the due date.
Borrow Wisely
Whenever you apply for a Personal Loan, the lender makes a hard enquiry on your credit report. Each hard enquiry reduces your credit score by a few points. So, borrow wisely to minimise the number of hard enquiries on your credit report.
A Personal Loan is a saviour when financial issues arise. However, maintaining a decent CIBIL score for a Personal Loan is essential. It helps get the best loan deal with low interest rates. It gives you more power to negotiate the loan terms and conditions. So, check your CIBIL score before applying for a loan to ensure approval.
