“Find out your credit score here!” or “What is your credit score?” or “Your credit score for a personal loan is low.”
Do you recognize these lines? You may have noticed such messages when inquiring about or applying for a personal loan. A Credit Score, also known as a CIBIL score, is one of the required checks to verify your identity and eligibility for a personal loan.
Numerous financial institutions, including banks and NBFCs, provide loans to individuals in addition to credit cards and other financial products. These loans are granted only to applicants who have a strong credit score.
This article will discuss how the CIBIL Score is important for personal lending.
What is CIBIL Score?
Credit Information Bureau of India Limited gives CIBIL Score to an individual that shows the
required creditworthiness of the borrower and the ability to make repayment. The CIBIL Score is a 3-digit number calculated based on your loan repayment history. It is determined by numerous factors, including your open or closed loan accounts, credit history, loan repayments, etc. However, different banks and financial institutions have different criteria for issuing loans to applicants. Some banks also provide instant loans without CIBIL, and in some places, it is challenging to avail of instant personal loans without a CIBIL score.
Minimum/Maximum CIBIL Score
Your CIBIL Score ranges between 300 to 900. Those with higher scores have a greater chance of getting approved for loans. According to CIBIL’s analysis, individuals with a score of 750 or more have the highest success rate in loan approval. If the borrower’s CIBIL is below 700-650, he might face challenges in getting instant loan approval.
Importance of CIBIL Score for Personal Lending
A CIBIL Score is important as it helps both the borrower and lender approve the loan. It works as the first impression for the loan provider, as a high CIBIL score increases your chances of instant loan approval.
-
Credit Status
A CIBIL Score helps a loan lender know your credit status. Your loan verification and approval solely depend on your CIBIL score.
-
Lower Interest Rate
If your CIBIL ranges between 750 to 900, the bank may easily grant you the personal loan at very low interest, whereas if your CIBIL is below the required score, you may obtain a loan at higher interest.
-
Loan Tenure
If your CIBIL Score is average, you can obtain an instant personal loan for 3 months, and with a great score, you may receive a loan for a longer tenure, like 42 months.
-
Minimum Documentation
A high CIBIL score can help you secure a loan with minimal paperwork, while a lower score may result in more extensive paperwork requirements from the bank.
-
Instant Approval of Loan
A low credit score can decelerate the approval process for a personal loan, as the bank must carefully verify your information. Similarly, if you have a high credit score, the process of approval becomes much easier and faster for you.
-
Instant Approval on Leased Properties
A highly maintained credit score helps you get easy loan approval on leased properties like homes, complexes, flats, shops, apartments, etc.
-
Negotiation
If you have a high credit score, you can negotiate to bring down your interest rate, customize your personal loan tenure, or request benefits and privileges.
Is it possible to get an instant loan without CIBIL?
Getting an instant personal loan without CIBIL is challenging, but you can still avail of a loan with a low CIBIL. To get the loan approved:
- Apply for a small amount
- Personal Loans can be availed of without a guarantor, but if you are applying for a loan with a low CIBIL, ask a family member or friend to be the guarantor.
- Attach the proof of income at the time of the loan application. It will assure the lender that you have a solid income source and can repay the loan on time.
Conclusion
The CIBIL Score plays a pivotal role in the instant approval of personal loans. With a high score, an individual can get a loan with low interest, which makes the loan process hassle-free. However, you can apply for a personal loan from IIFL Finance, one of India’s most reputable financial institutions.
Interesting Related Article: “Types of Personal Loans: What You Need to Know“