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Know How CIBIL Score is Important for Personal Lending

  • 3 min read

  • Highlights

  • CIBIL score determines your creditworthiness

  • It determines the rate of interest and loan amount

  • A healthy score expedites the loan application process

  • Anything above 750 is considered a good score

There are occasions in life where you need access to additional finance to fulfil your short and long-term goals. While short term-goals may include home renovation and going on a vacation, long-term goals can be buying a home or marriage. A personal loan is an ideal funding option to address these goals. However, prior lending, financial institutions look at certain parameters to gauge your creditworthiness. CIBIL score is one among them.

Minimum CIBIL Score for Personal Loan

TransUnion CIBIL, one of the India's leading credit information companies, incorporated in 2000, analyses and delivers a three-digit score, between 300 and 900, based on your credit history. The higher the credit score is, the better are the chances of personal loan approval. A score of 750 and above is what is generally considered the ideal CIBIL score for loan approval.

Your score plays an integral role in your financial journey and affects various aspects of lending. Read on to know the importance of CIBIL score, while availing a personal loan.

Rate of Your Creditworthiness

Your CIBIL score gives the first impression to your prospective lender about your creditworthiness. It tells them whether you can repay the loan on time or not. While a high score instils a sense of confidence among lenders, a low score raises a red flag. It’s not that you can’t avail a personal loan with a low credit score. However, it will come with various terms and conditions attached.

Approval of Loan Application

The CIBIL score plays a crucial role in the time taken for loan approval. A high CIBIL score expedites the loan application process. Since a high score helps in winning the trust of your potential lenders, they take minimum time in processing your application. Faster processing of your application ensures quick disbursal of funds into your account, which you can use to address your needs.

Additional Read: How to Improve CIBIL Score

Your CIBIL score and Your Personal Loan

Your CIBIL score and your personal loan

Lower the interest rate, lesser the money you repay on the loan you borrow; this is the simple logic behind unsecured personal loans. But lenders do not assign the interest rate arbitrarily. They consider your credit score – a measure of your creditworthiness – to assign you the interest rate for your personal loan.

Your credit score ranges from 300 to 900. The higher your credit score, the better are your chances of getting approval and favourable terms on your personal loan. Lenders like Bajaj Finserv give preference to a credit score of at least 750 during personal loan application processing.

Lenders prefer an applicant with a high CIBIL score because it demonstrates their ability to handle credit well. A low score, on the other hand, indicates a previous instance of loan delay or default.

If your CIBIL score shows you to be a high credit risk, you will be charged a higher interest rate on your personal loan.

How you can use the Personal Loan?

Competitive Interest Rate

Before availing a personal loan, it’s crucial to find out the interest rates. With a high CIBIL score, you stand a great chance of availing a loan at competitive rates of interest. It gives you the power to negotiate with your lender. In fact, some lenders may even waive off the processing and pre-payment charges. On the other hand, a low score tilts the scales in favour of the lender, when it comes to determining the interest rate.

Estimation of Loan Amount

The amount of loan you can get rests on CIBIL score. A high score entails a higher amount and vice-versa. It also leads to minimum documentation and ensures a hassle-free borrowing exercise.

Additional Read: How to Read CIBIL Report

The CIBIL score ranges between 300 to 900. The closer you are to 900, the better are the chances of your loan approval. Now, you can get free CIBIL score at Bajaj Finserv at no extra cost. All you have to do is enter your details and access your credit score for free.

DISCLAIMER: The personal loan features mentioned in this article are subject to change, based on policy revisions. For the updated product details, please visit the Bajaj Finserv Personal Loan page here.

 

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