Having access to various types of loans helps you to meet any sort of urgent financial needs. However, getting a loan is not easy as it requires completing a series of steps. The eligibility of the borrower along with his or her income, job status, nationality and credit history play a major role for loan approval.
Many lenders give priority to the credit score of an applicant before approving a personal loan as it reflects the borrower’s financial health. It’s easier to get approval for a personal loan with a high credit score or CIBIL score.
However, lower credit scores can impact the process as lenders judge the borrower’s potential based on the credit history.
Let’s know more about the importance of credit score and the lowest acceptable score for getting a personal loan.
Importance of credit score for a personal loan
Personal loans are unsecured loans, which are usually offered by financial institutions or banks without any collateral or security. It is often considered as a risky investment for the lenders. In such cases, lenders usually pay close attention to the borrower’s credit score to evaluate his or her potential and credit history before approving the loan. Thus, it is important to maintain a high credit score to avail credit facilities.
What is the minimum credit score required for a personal loan?
While there is no fixed standard that can be denoted as a minimum acceptable credit score for a personal loan approval, a score of 750 or above is usually considered good. Also, something between 720 and 750 can be said to be the lowest acceptable credit score and having this score might make the borrower creditworthy for loan approval.
In some cases, applicants can also get a personal loan with a credit score between 600 and 700. However, a lower score will mean a lesser loan amount. Scores up to 600 are considered inadequate for personal loans in most cases.
Having a low credit score does not always necessarily mean that the personal loan application will be rejected. Sometimes, loans are sanctioned at a higher interest rate or for a lower amount.
Therefore, to easily avail a personal loan, one should follow a few simple steps:
– Check CIBIL score and CIBIL report carefully
– Clear pending payments or dues within deadline
– Do not apply for new loans if other applications were rejected recently
– Avoid taking too much debt at one time