There may be moments in your life when you need some extra money to meet your short-term or long-term goals. Whether it's for a marriage, buying a house, a vacation or home renovation, a personal loan can help you to fulfill your financial obligations.
If you are looking to avail of a personal loan, one of the first things that a lender will check is your CIBIL score for loan approval.
Why is the CIBIL Score Important?
TransUnion CIBIL is one of the most trustworthy credit bureaus in India. Lenders such as non-banking financial companies and banks will check CIBIL score of a borrower while processing the borrower’s loan application. While there are other credit scores such as the CRIF Highmark which is equally accurate, CIBIL is more widely known in India.
Lenders use credit scores to assess a borrower’s creditworthiness. If you manage your finances well and have a good credit history, you should have an excellent score. For most lenders, 750 or above is considered to be an excellent CIBIL Score for a Personal Loan.
Borrowers with lower CIBIL scores may have a hard time getting loans from financial institutions. They usually end up paying higher interest rates on loans, or may even get rejected by the lenders.
Must Read: How is Your CIBIL Score Calculated?
Lenders also use various other parameters such as location, age, work experience, income stability, nature of the profession, etc. to assess your eligibility. However, when it comes to applying for a personal loan, having a sound CIBIL score for loan approval goes a long way in securing a nod from the lender of your choice.
Why is the CIBIL Score Important For Personal Lending?
- Minimum Credit Score
CIBIL gets data from financial institutions and analyses the data to create a report for every individual and delivers a 3-digit score based on the same. Your CIBIL score can range anywhere between 300 and 900. The higher your score, the better your chances of securing loan approval.
Simply put, your CIBIL score is the numerical representation of your creditworthiness to a lender. It intimates to your lender how likely and capable one may be to repay EMIs as per the loan schedule. A lender will check CIBIL score and hedge their risks by giving excellent offers on loans to borrowers who have high credit scores. That is not to say, that individuals with low CIBIL scores do not get a personal loan on CIBIL score. However, financial institutions are likely to charge higher interest rates and insurance costs to those with medium scores. Applicants with poor credit scores and a history of defaults may get rejected.
- Application Approval
A high CIBIL score acts as a catalyst in the passage of your loan application. When a lender receives a loan application with a high credit score, it is able to process the same quickly because the proof of credibility has already been verified.
This, in turn, will lead to a swift disbursal of funds into your account so that you can put it to use in time.
- Interest Rate
More often than not, the personal loan interest rate is the deal-breaker when you are applying for a personal loan on CIBIL score. A borrower with a robust CIBIL score is in an enviable position. He or she can potentially command a personal loan interest rate of choice and pick from a veritable list of lenders who offer the most favorable terms and conditions for the loan.
Having a say over your personal loan interest rate can affect your repayment tenure in a significant way. By regulating your personal loan interest rate, you can decide how soon you become debt-free.
Having control over your loan repayment rate can help meet your deadline every month. By repaying your loans within time, if not earlier, you provide a healthy boost to your credit score.
This will stand you in good stead in the future when you choose to apply for a personal loan online on CIBIL score again.
- Loan Amount
The ticket size of your personal loan is also dependent on your credit score. The better your score, the higher the amount for which your loan will be approved.
In addition to the aforementioned advantages, a good CIBIL score also ensures that your personal loan goes through with minimal documentation.
Must Read: How to Check CIBIL Score Online With your PAN Card?
Apart from these, there are also some additional benefits of having a good credit score. For example:
- These days, many organizations perform credit checks before hiring candidates. A good credit score will add to your chances of getting a job.
- These days, many landlords and societies request credit checks before agreeing to rent out a place to applicants.
- A lot of furniture rental companies also perform credit checks before offering a price to possible customers. Having an excellent score will ensure that you get good offers.
- Thus, before applying for a personal loan online it is advisable to check your credit score so that you can be more prepared.
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