There are many things to take into consideration when you think of online loan approval. The loan applicant should factor in the loan eligibility criteria of the lender and look at their credit score aka the CIBIL score when applying for a loan.
Personal loans are usually unsecured and do not take any collateral into consideration. However, a borrower’s CIBIL score is factored in to estimate their ability to repay on time. If you have low CIBIL score for personal loans: not just your online loan approval but the entire loan application process may get stalled.
The CIBIL score usually comes in the range of 900 and 300. If the CIBIL score is lower than 700 or 600, the chances of getting a personal loan go down. Most banks need a CIBIL score of at least 750, and this can help you get your loan approved.
If you have a CIBIL score that is closer to the 900 mark, then it can help you get the best terms for a personal loan. In case you have a CIBIL score of 750 or above, you will still be able to get good loan offers. Some lenders also give you a low CIBIL score personal loan if you at least have a CIBIL score above 550, though the interest may be high.
Even if you get a loan with a low CIBIL score, your interest rate will be high. With a high-interest rate, the actual benefits of the unsecured loan go down. The additional charges on low CIBIL score personal loans are another disadvantage. Therefore, it is very important to improve your CIBIL score. Here’s how you can improve your credit profile and CIBIL score –
Make timely payments on credit cards
If you have credit cards, then make sure you are repaying the dues on time. These days, people buy a lot of things with the use of a credit card and simple instalments. Always try to repay the instalments on time to maintain a good credit score. Take loans and repay them on time. The repayment frequency and history make a lot of difference.
Pay the outstanding loan balance
If you are financially able, you could try to pay back the entire outstanding loan amount, and prove your financial stability, and also stand to get the best possible terms on the next unsecured loan you apply for.
Do not max out the credit
Credit cards play an important role in determining your CIBIL score. When using a credit card, we often forget to keep checking the credit limit and buy things outside its confines. This type of reckless behaviour can bring down the CIBIL score.
Try not to go beyond the 75 percent mark of your credit line or max out the credit cards altogether. Always shop responsibly and pay the credit card bill on time so that the credit does not accumulate and cause problems for you and your credit score. Such behaviour is seen as irresponsible and affects your personal guarantee when taking the credit out.
Do not make late payments
Every credit card bill has a time period to give out. If the credit card bill is not paid in that time frame, the bill goes late, and this can reflect poorly on your CIBIL score. On the other hand, having too many lines of credit and especially unsecured ones also affects the CIBIL score negatively. Therefore, always go for a stable and payable line of credit to maintain a good credit score.
Your CIBIL score is as important as your personal details in a loan application.
Lenders will also take into consideration the repayment history of every applicant, who is seen as a responsible borrower if they repay their other loans on time. If there are loans that are still active and you have paid the dues on time, a lender could still approve your loan application.
Please ensure your credit report doesn’t have omissions or errors in it. An error in the credit report can reduce your score and dampen your chances of getting a personal loan on an unsecured basis. If your CIBIL score is not so good, you can take some steps to improve it over time.