Personal loans as we know are financial assistance to meet personal goals. And currently, many organizations are offering a loan to customers to fulfill personal goals. But there is a catch; if you’re a regular defaulter it affects your CIBIL score and subsequently decreased chances of loan approval. No organization would like to associate itself with a customer whom they think had a higher chance of defaulting.
Personal loans are a necessary financial assistance for the general population; it facilitates opportunities that they need to get ahead in their life and enjoy varied facilities. So, how challenging it could get for loan approval if you have a very low CIBIL score?
In this blog, we would understand in detail the relationship between CIBIL score and personal loan, the effect of a low CIBIL score, the right score required for a desirable personal loan, and many others.
Minimum CIBIL score required for personal loans:
While a score of 720 is good to get you a personal loan but if you want a loan on your terms then you should aim for a 750 or more CIBIL score. It would significantly help you get a loan with the right interest rates. It all means you could repay it easily at the right time.
But different banks prefer varied CIBIL scores to give customers their desired personal loans. While the difference isn’t high but yes, you need to be surely above 700 or you are out of the loan approval race.
As a customer, you should have an upper hand with the best CIBIL score so that you get the approval easily and that too at a nominal interest rate. This financial strategy in the long-term helps you avoid being a defaulter.
CIBIL score impacting loan interest rate:
This is one of the significant things that a customer should know precisely. Many banks provide the lowest interest rate to customers who have a score of around 850 or more. So, every individual who wants a personal loan should improve their score near to 850 and even aim for more. It’s just like the bright student receiving the goodies for better performance than other students.
When you’re in a strong financial position, organizations wouldn’t hesitate to lend you the loan. So, it is advisable to be in the right books, i.e, have the optimum CIBIL score for maximum benefit.
What to do before submitting a loan application:
Some of the best practices that you need to follow before applying for a loan are:
Understand how and when can you pay loan:
You should understand whether you could pay the loan on time. Without evaluating these, you shouldn’t go for a loan as it might hamper your future plans. Even if you default once it would affect you in the long term; you might not get the best loan with the right interest rate. Have a clear idea about your financial resources and how much you can invest or pay without straining your savings.
Also, you need to have a healthy financial record so that whenever you go for a loan, your application is accepted. Every small thing counts here as you need to showcase your credibility as a customer.
Clear all dues:
You should clear all dues before applying for loans. The more you focus on this aspect you’d have increased chances of receiving loan approval at the desired interest rates. Many financial organizations would look into this while doing background checks and going ahead to approve loans. They want to be sure that they are dealing with the right customer.
So, the mantra here is prioritizing all dues, clearing them off at the right time and getting a green signal for the right loan.
How to keep your CIBIL score steady?
If you want to keep your CIBIL score steady and further improve, you need to follow simple rules:
Keep track of your score:
You should keep track of your CIBIL score at the right intervals. This would make you aware of whether you’re going down in the score level and need to step up for improving the score. Resolving at the right time would keep your score level steady and improve credibility.
Trustworthiness is just like reputation that you have among the lenders. A good credibility makes the lender at ease with you and they would approve your loan request easily. They acknowledge that you can pay back the amount at the agreed time.
Make right financial decision:
Even though we all aspire for a better life and go for a loan, it is necessary to understand whether you actually need a loan. You should know that taking a loan resolves the immediate financial challenge but in the long-term, you need to repay it at the agreed time. And if you don’t do that, you’d be on the list of defaulters- a bad sign for your CIBIL score.
So, sit down and think with a logical mind. Calculate your income, your expenses, understand your long-term and short-term plans, how are you going to achieve it, do you need a loan for your short-term need or long-term requirement, would the loan be helpful to improve your income with the right investment, and so on. Likewise, you could make the best decision and secure your finances at the right time. Finally maintaining a steady CIBIL score.
Maintain low frequency of applications:
You should aim for a low number of applications. Applying frequently and getting rejected might also affect your score. So, apply for a loan only if you need it really.
Applying too often for luxury items without any proper plan of “how to repay” could also have an impact on your score.
Look for an elongated time:
If you’re ever applying for a loan, look for the plan that gives you more time to repay the dues. It would give you peace of mind and concurrently, you could pay back your dues at the right time. In short, it means you’re buying the time to accumulate the amount that you need to repay. By honoring the agreement, you could prove yourself as a trustworthy customer.
Gradually, your CIBIL score improves further helping in future financial decisions and applications.
FAQs
1. What CIBIL score is required for a personal loan?
Ans: A CIBIL score of more than 750 would help you get a personal loan with a better interest rate.
2. Can I improve the CIBIL score in a short span?
Ans: It’s a gradual process but you can follow some rules such as paying all your dues, no need to take more loans at a time, if you take loan aim for a lower interest rate so that you can pay dues on time and avoid being a defaulter.3..
3. What are the main factors that affect the interest rate on a loan?
Ans: There are many factors such as your CIBIL score, the tenure of your loan, the policy of each financial institution, etc.
4. What is a low CIBIL score?
Ans: A low CIBIL score is generally the one that is below 650. You’d face challenge in getting loan approval if the score is less than 650.
5. Can unemployed people get personal loans?
Yes, they could get but they should have a good CIBIL score. Better, if you have almost nil default and due payment at the right time.
Conclusion:
Personal loans are necessary for the majority of the middle-class population. So, if you’re looking for the right personal loan, you need to have a great CIBIL score. This blog explores some of the best ways that you could integrate to improve your CIBIL score.
The better your CIBIL score you could choose the best personal loan with the right interest rate to help you achieve objectives.