You must have had plans for a vacation or purchasing a dream car or any other personal expense for which you might have thought of opting for a personal loan. You must know that a personal loan is a short- or medium-term unsecured loan, where there’s no constraint on its end-use.
However, you do need a CIBIL score to avail a personal loan. Financial institutions check your eligibility through your CIBIL score that is based on your history with previous loans and credit cards or your income. CIBIL allocates a 3-digit score ranging from 300 to 900. Financial institutions take the risk of losing their money if you turn out to be a defaulter, so they assess your credit history before approving your loan application.
A CIBIL score of 750 is considered favourable, but a score of nearly 900 increases your chances of loan approval. It may also result in reduction of your personal loan interest rates. If you have a score below 600, financial institutions might ask for steep personal loan interest rates. A good score echoes reliable credit behaviour and enables you to negotiate on a higher loan amount.
Remember that if you are eligible for a personal loan with a low credit rating, financial institutions will likely charge you higher personal loan interest rates, early repayment charges, and other fees.
Thus, before taking a personal loan, compare the personal loan interest rates, other loan terms, or your personal loan EMI using the personal loan EMI calculator available online to see who offers you the best deal.
If you are concerned that your CIBIL score does not match the lender’s eligibility criteria, there are a few things you can do to improve your score so that you will be able to get away with a personal loan at a favourable interest rate and a favourable term. Making your payments on time will help improve your payment history and creditworthiness. Avoid multiple loans as they may reduce your repayment capacity. Maintain a proper balance among secured and unsecured loans. Personal loans might affect your balances for some time, but make your payments on time. This will boost your credit score. The real difficulty lies in consistently making these things over the long term.
So, to start with, decide the amount of loan you require. Then check the personal loan interest rates offered by different financial institutions and compare them. Use a personal loan EMI calculator to check the EMI that you will need to pay every month. Make sure that you opt for an amount that you will be able to pay on time.
Once you are done with these steps, you can fill out the application form for the loan. Financial institutions will conduct their checks, which will include an assessment of your CIBIL score. It is rightly said that the first impression is the last impression. If your CIBIL score is below 600, financial institutions may not even consider your application. If your CIBIL score is good, then your application will be considered. Several other factors such as income, repayment capacity etc., are considered. At this stage, it is solely the discretion of the financial institution whether your loan will be approved or not. A good CIBIL score alone does not guarantee the sanction of a personal loan.
Keep in mind that credit rating by CIBIL plays a serious role in helping you qualify for personal loans. However, the financial institutions take other factors into account such as how much you earn, the taxes you pay, and for how long you have been employed. A higher score may lower the personal loan interest rates. You can also calculate the EMI using a personal EMI calculator before taking your final decision. The process is quite convenient. So, check your eligibility and apply for a personal loan online today to fulfil your dreams.