Minimum CIBIL Score for Personal Loan: All You Need to Know
In today’s fast-paced life and digital era, availing a personal loan has never been easier, courtesy of online lending portals. However, there is one vital parameter that decides your loan sanction, i.e., credit score. Your minimum CIBIL score for a personal loan is one of the most significant factors that determine your eligibility, interest rates, and borrowing experience.
This article discusses what is a CIBIL score, how it affects loan sanction, the best credit score to get a personal loan, and how you can improve it to get a good loan offer.
Understanding the CIBIL Score for Personal Loans
Your CIBIL score is a three-figure number ranging from 300 to 900 which is your credit-worthiness. It is calculated based on your credit history, payment behavior, existing loans, and other financial habits.
When you borrow a loan, the lenders check your CIBIL score to determine how creditworthy you are. If you have a good score, it means that you are reliable and therefore availing a loan with low interest is easy for you, but if you have a poor score, then you can be denied or your loan conditions will be poor.
What is the Minimum CIBIL Score for Personal Loan Approval?
The minimum CIBIL score for availing a personal loan is different from one lender to another, but banks prefer that the borrower have a minimum credit score of 700. Below is a table giving an outline of various credit score ranges and their effect on lending:
1. Excellent Credit Score (750 and above)
This score is ideal for obtaining a personal loan. Individuals with a score of 750+ enjoy lower interest rates and good repayment terms. They get more approval possibilities with all lenders.
2. Good Credit Score (700-749)
Most lenders still approve loans to borrowers in this segment. The rate of interest will marginally be more than individuals with a credit score of 750+. Steady income and low debt ratio will enhance the chances of approval.
3. Fair Credit Score (650-699)
Some of the lenders can offer loans but the terms are not that good. The borrowers will have to pay more interest and harsher terms. A good work record and loan repayment record can enhance the chances of approval.
4. Poor Credit Score (Below 650)
This bracket reduces the possibility of taking a loan to a large extent. The borrower can take loans at very high interest rates and with low loan amounts in case of approval. It is recommended that the credit score be enhanced before applying.
[Read About: Credit Card vs Personal Loan for Financing ]
Factors Affecting Your CIBIL Score for Personal Loans
Your credit score is just one of the points the lenders keep an eye on while analyzing a loan application. There are other important considerations as well that can establish your eligibility:
1. Repayment History
Regular payment of past loans and credit card dues strongly improves your CIBIL score. Defaulting or late payments adversely affect your creditworthiness.
2. Credit Utilisation Ratio
A high utilization ratio of credit (using more than 30-40% of your available credit) can be a pointer to financial strain, and that will affect your credit score. Maintaining a low utilization ratio will increase your score.
3. Debt-to-Income Ratio
Lenders will take into consideration your debt-to-income ratio to see if you can afford to repay the loan. If the ratio is high, there is too much financial burden, and it’s hard to approve.
4. Credit Mix and Period
A reasonable combination of secured (home loan or car loan) and unsecured (personal loans, credit cards) account credit can assist your score. Also, the fact that long-term accounts have been kept reflects good credit maintenance.
5. Number of Applications for Loans
Several applications within a short while can decrease your credit score due to the reason that each loan application results in a hard inquiry, i.e., increased dependency on credit.
How to Increase Your CIBIL Score to Get Better Loan Eligibility?
If your CIBIL score is lower than the recommended limit, then there are various ways to increase it before availing a loan:
1. Pay Bills Promptly
Timely payment of existing loans and credit card bills significantly improves your credit score in the long term.
2. Reduce Outstanding Debt
Pay off high-interest debt and never max out your credit cards to improve your creditworthiness.
3. Review Your Credit Report Periodically
Look for mistakes or misinformation in your credit report and dispute any errors that are hurting your score.
4. Don’t Take on Too Much New Credit
Don’t take out more than one loan or credit card within a brief time frame, as this hurts your score.
5. Maintain a Good Credit Mix
Having a mix of secured and unsecured accounts reflects good credit habits, which increases your score.
What if You Don’t Qualify Based on the Minimum CIBIL Score for Personal Loan?
If you have a low minimum CIBIL score for personal loan eligibility, apply through the following alternatives:
1. Apply with a Co-Applicant
Having a co-applicant with a good credit history can improve your chances of approval and get you better loan terms.
2. Opt for a Secured Loan
As an alternative to an unsecured personal loan, you can go in for a secured loan wherein you will put up an asset (e.g., gold, property, fixed deposit) as collateral.
3. Go to NBFCs or Fintech Lenders
Some Non-Banking Financial Companies (NBFCs) and online lenders give loans to those with low credit scores, though the interest rates are high.
4. Improve Your Score Before Applying
If your credit history is negative, then it is best to wait and raise your credit score first before applying so you will not get rejected and also so that there is no further deduction in the score.
Smart Borrowing from the Right Lender
Though the minimum CIBIL score for a personal loan is of major concern in getting approved, the selection of a lender also plays its role. Ensure you select a lender that charges less interest rate, has lenient repayment plans, and demands fewer documents.
If you need instant access to funds with instant approval times, an online lending portal could be the best route of escape.
Avail Iof nstant Loans with Stashfin
In case you require immediate financial help, Stashfin offers instant loans of up to ₹5 Lakhs with automatic digital processing with a minimum CIBIL score for personal loans. With the feature of up to 30 days of interest-free credit, interest charged only on the borrowed amount, and a simple loan repayment tenure of up to 36 months, Stashfin guarantees easy borrowing for any of your requirements.
