In an ideal world, we would all be financially and emotionally strong enough to deal with emergency situations. Unfortunately, the reality is different! Life often comes in the way, and the money we intend to save or invest gets used up either as a part of our living expenses or sometimes, even as indulgence. Then again, even if we manage to set aside some savings for the rainy days ahead, the saved amount might not be sufficient to meet those urgent expenses.
In such situations, we are left with almost no choice but to opt for a Personal Loan. Owing to minimal documentation, easy approval, and quick turnaround time, Personal Loans these days have become one of the easiest ways to avail funds during pressing times. Unlike secured loans, Personal Loans have rather lenient eligibility criteria, especially with respect to the income and employment of the borrower. However, banks only offer unsecured loans to individuals with a high CIBIL Score in a bid to be assured of successful repayment of the loan in time.
Credit Information Bureau of India Ltd. is one of the leading credit bureaus of the country, which maintains a credit report of every individual who is above the age of 18 and is a taxpayer. The report essentially holds the credit behaviour of the individual, on the basis of their income, spending habits, loans under their name, repayment behaviour pertaining to the loans and Credit Cards, and more. Likewise, a credit report of the business entity is also maintained. Based on these aspects, the individuals receive a three-digit numerical score which ranges from 300 to 900, where:
As can be understood, most lenders are inclined to offer loans, especially Unsecured Personal Loans, only to individuals with a credit score of 650 or above. Not only does this score reflects the responsible repayment behaviour of the borrower in the past, but also acts as an assurance of the borrower’s overall financial discipline to the lender. A high score, therefore, implies a low-risk proposition for the lender and warrants quick approval of the loan application for the borrower.
It is thus extremely crucial for every individual to try and maintain as high a Credit Score as possible.
HDFC Bank offers Personal Loans of amounts up to Rs. 25 Lakh, which can be repaid through easy instalments over the tenure of 12 to 48 months. The bank ensures approval of loan application for general applicants within 4 hours, and for pre-approved customers in an incredible 10 seconds. Offered at a competitive interest rate ranging from 11.25% to 21.45% per annum, Personal Loans from HDFC Bank are highly sought after! The loan comes with the added facility of a personal accident cover, as well as a credit shield. As discussed earlier, even HDFC requires the candidate to have a relatively high CIBIL Score. HDFC offers loans only to applicants with a score of 750 or above.
Hence, it is highly recommended for you to get your Credit Score checked before filing your application for Personal Loan from HDFC.
ICICI Bank offers Personal Loans of amounts ranging from Rs. 50,000 to Rs. 20 Lakh, which can be repaid over the tenure of 12 to 60 months in the form of equated monthly instalments. For pre-approved customers, the bank guarantees a disbursement in as little as 3 seconds. The bank requires minimal documentation and offers the loan at somewhat reasonable rates ranging from 11.25% to 17.99% per annum. As is the case with any of the leading banks, even ICICI Bank Personal Loan requires a minimum Credit Score of 700 to be eligible for the loan.
If you do not enjoy a high Credit Score, you might be worried about your Personal Loan application getting turned down. That shouldn’t be the case, however. All you need to do is follow the below-mentioned steps, and your score will see a significant improvement in the coming months. This will not only make you eligible for most Personal Loans but will also ensure that you procure the loan on favourable terms.
Make sure to use your Credit Card regularly and clear your bills on time. This will signal the Credit Bureau that you are a responsible borrower, and will help raise your credit score.
Again make sure that you use only up to 30% of your credit limit. This will reflect fairly on your credit behaviour and will let the bureau know that you are financially strong and do not need to rely on credit for your day-to-day expenses.
If you are servicing a loan, make sure to pay each of your EMIs on time, without fail. Non-payment of EMI will reflect poorly on your financial health and may result in lowering your credit score.
It is crucial to understand that you must apply for a loan only when it is absolutely necessary. Applying for multiple loans in a short span of time, or having Multiple Credit Cards, each with outstanding balances could hurt your Credit Score. Hence, try and stay away from any type of credit trap.
We hope that you now have a fair idea about CIBIL Score, their significance, and tips to enjoy an improved credit rating.
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