India’s personal loan market is growing rapidly and it has become very easy for people to access the loan offer due to the increasing number of instant loan apps. Meanwhile, due to flexibility and easy application process, people are giving more attention to personal loans than other loan options. Actually, you can spend the money of personal loan anywhere according to your wish. Two factors play an important role when applying for personal loans. These include income and credit scores.
Although the eligibility for personal loans may vary from the criteria, terms and conditions according to the lender, it is mostly observed that the stable income and high credit score of the applicants are given more attention.
It is true that credit score is the most important factor for taking personal loans, but people with low credit scores often think about taking personal loans. Now the question is, can you get a personal loan if you have a low credit score? What should be the least credit score to take personal loans in India. Let us find the answer to this question in this article, but before that it tells what the credit score is.
What is a credit score?
Credit score is a number of three digits, which shows about your financial health. Credit score ranges from 300 to 900. Credit score tells banks whether you repay your debt on time or not. Your credit or cibil score plays a special role in sanctioning loan applications.
You can see your credit score free on many platforms. For example, on the Moneycontrol app and website you can check your credit score without any fees. Through this, you can also apply for personal loans up to Rs 50 lakh from 8 lenders. Moneycontrol offers 100% paperless process for personal loan and interest rates here start from 10.5% annually.
Why does a credit score to take a personal loan matters so much?
Your credit score plays an important role in deciding whether your personal loan application will be sanctioned or not. Let us know why the credit score is so important:
- Risk assessment for lenders: Your credit score helps lenders understand whether you are likely to repay the loan. High credit score reflects the payment made on time and hence the risk of default is low. Due to this, the chances of approval of personal loan are increased.
- Loan Repection Interest: If your credit score is high, then there is a possibility that you can be offered a loan at a low interest rate. On the other hand, if the credit score is low, then the entire bet can be reversed because the risk increases for the lenders.
- Loan Amount: Due to high credit score, the loan of more amount is also approved because the lenders are confident that their money will not drown.
- Loan Tenure: A good credit score helps you get loans on better terms, such as long tenure and low interest rates.
How much should the credit score be minimized for personal loans in India?
The lowest credit score for personal loans in India may vary from every bank. However, most of India’s lenders give personal loans when there is a credit score of 700 or more. To get a better personal loan offer, the credit score should be above 750.
However, some banks give personal loans on credit scores less than 700, but in such a situation, interest rates are likely to be very high. The lower your credit score, the higher the interest rates. You will not get any benefit in the case of loan tenure and loan amount.
How to improve your credit score?
- Pay on time: The best way to improve credit score is to pay your EMI on time.
- Reduce new credit application: If you are applying for several credit at a time, the banks will inquire more about your credit score, which can reduce your credit score.
- Monitor your credit score: To improve your credit score, it is necessary to check it from time to time. Keep an eye on it regularly, but avoid checking it quickly, because it can cause negative impact on your score.
- Keep credit utilization low: Maintaining low credit utilization ratio can put positive impact on your credit score. Do not use your available credit more than 30%.
Summary
Can a personal loan be found even if there is a low credit score? How much credit score should be to take personal loan in India. Along with this, know better loan offers and tips to improve your score for low interest rates.
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This fraction/article is written by an external partner and does not reflect the work of the editorial team of Moneycontrol. This may include references to products and services offered by Moneycontrol.