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What is the Minimum CIBIL Score Required for a Personal Loan?
As a personal loan is an unsecured credit product, lenders emphasise on the credit score the most. A good credit score is very important for such credit applications to get approved. However, there is no fixed requirement for a minimum CIBIL score for personal loan approval.
Generally, a CIBIL score of 750 and above is considered good for getting a personal loan approved without many difficulties. However, some lenders may also approve your personal loan application even if your score is below 750. But you may have to adhere to stricter loan terms, higher interest rates, smaller tenure, etc.
In many cases, some lenders may approve the personal loan application of applicants who do not have a credit score or those who are new to credit. However, they may not get the best personal loan offer. Such applicants can start building their credit score and apply for a personal loan when their score is good enough for securing a less-costly loan offer.
Subsequently, a high credit score can also help you get a higher loan amount and that too, at lower interest rates and with a longer repayment tenure.
Why is CIBIL Score Important to Get a Personal Loan?
Personal loan is termed as an unsecured loan that means when a bank or NBFC lends you funds, they do not require any collateral or security to be submitted with them, unlike in case of home loan, car loan, gold loan, etc.
As it is considered as a risky investment for the lenders, so they pay close attention to an applicant’s behaviour through the credit score, while evaluating their personal loan applications.
Credit Score helps the lender in the following ways:
- Determine your (borrower’s) creditworthiness
- Decide the rate of interest to sanction the loan
- Decide your loan limit (i.e., how much you can borrow)
Please note that while having a low CIBIL score does not necessarily mean your personal loan application will be rejected, you may end up paying a higher overall cost of credit.
Also Read: How to Take a Personal Loan on Aadhar Card?
Things to keep in Mind when Applying for a Personal Loan
Before applying for a personal loan, consider the following points:
- Check your CIBIL score for personal loan and report if you find any errors in your report, get those corrected at the earliest
- In case of a high credit utilisation ratio, clear your outstanding soon and reduce your CUR, as a high credit utilisation portrays you as overdependent on credit.
- Refrain from applying for new personal loans if your similar applications were recently rejected.
- Keep your EMI to NMI ratio low, as many banks may not approve your loan application in case this ratio is quite high, especially if the income is moderate.
FAQs on CIBIL Score for Personal Loan
Q. Can I apply for a personal loan without having a CIBIL Score?
Ans. Getting personal loan without CIBIL score is rather tough but not impossible. Many lenders provide personal loans to those who are new to credit.
In case your application for a personal loan without having a CIBIL Score is not approved by a lender, you can apply for collateral-based loans which means loan against gold, loan against FD, etc. However, it is advisable to maintain a CIBIL Score for instant approvals on loans.
Q. How to get a personal loan with a low CIBIL score?
Ans. There are various banks or other financial institutions that are willing to provide personal loan to applicants with an average CIBIL Score. However, in such cases, the interest rate is higher and the loan amount is lower.
Q. How having a high CIBIL score will help me in getting personal loan?
Ans. A high CIBIL score makes you eligible for some of the best personal loan offers by best lenders. A high CIBIL score also helps you in getting low-cost pre-approved personal loans that come with quicker approvals, low/no processing fee, relaxed foreclosure charges and lower interest rates. These factors play a major role when you need a loan during a financial emergency.
Q. Will I get a personal loan if my CIBIL score is 720?
Ans. Some lenders may approve your personal loan application at this score but you may end up paying a higher interest rate. Also, you will have to adhere to the stringent loan terms set by the lender.
Q. What are the factors that you need to consider in applying for a personal loan? Why is it important to consider those factors?
Ans. The factors that you need to consider in applying for a personal loan are the amount of loan, tenure of loan, comparison of loan offers for lower interest rate, etc. It is important to consider all these factors before applying for a personal loan because these will help you decide your repayment capacity, help in building your credit score, etc.
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