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A high CIBIL score has become a mark of your credibility and creditworthiness. Banks check whether your CIBIL score is above 750 points to process an unsecured personal loan or credit card. A low CIBIL score can be one of the personal loan rejection reasons. Management positions are offered to individuals with high credit scores who demonstrate reliability and stability. You may not be offered a rental property with a Low CIBIL score, and, on a lighter note, a marriage proposal may not materialise. Therefore, if your credit score is stagnant or has fallen below the acceptable threshold, take steps to fix it and improve your credit score quickly.

What Makes a CIBIL Score Drop?

A credit score below 650 points is regarded as a low CIBIL score. To improve a low CIBIL score, let us first check the reasons for it. Your CIBIL score can dip due to any of the following reasons:

Derogatory Credit Usage

  • Delays in repaying credit: A bounced EMI or a delay in repayment of credit cards are a sign of stressed finances. A single delay can be overlooked, but regular delays in repaying EMIs or credit dues can lower your CIBIL score.
  • Default Accounts: Loans that you have been unable to repay will be marked as delinquent. Loans and credit cards for which the principal amount is paid without interest are shown as “Settled”. A loan or credit card marked as Delinquent or a Settled CIBIL account in the credit history is a major setback to your CIBIL score.
  • Too Many Enquiries: Hard enquiries are recorded by CIBIL whenever a lender requests a Credit report. Hard Enquiries remain in the CIBIL history for 24 months. More than 3 to 4 consecutive hard enquiries will lower your CIBIL score by 10 to 15 points for each enquiry. With too many enquiries, a borderline CIBIL score is reduced due to excessive enquiries in CIBIL. Check eligibility using an eligibility calculator before applying for a personal loan.

Read more: Reasons for a Low CIBIL score.

A Stagnant CIBIL Score

Ever wondered why, even if you’re doing everything right, your personal loan application is still rejected due to a low CIBIL score? The fault may lie in the following reasons that keep your CIBIL score stagnant.

  • Restricted Credit Usage: Boosting a CIBIL score requires active use and timely repayments. If you have credit cards you do not use or have forgotten about, they may have a small pending balance. Pending credit and non-use can negatively affect your CIBIL score, keeping it low.
  • Maxing Out Your Credit Card:Using your credit cards up to 40% of the credit limit is a good ratio. If you are using the limits on your credit cards and sometimes drawing cash, even if you make payments on time, it will hurt your credit score, indicating overreliance on credit.
  • Use of New Credit: Taking a commodity loan or buying a new television or home appliances can help improve a CIBIL score, as new credit activity is important for assessing customers’ credit behaviour. How diligently are the repayments being made? Without fresh credit usage, your CIBIL score may remain dormant.
  • Co-applicant Defaults: A co-applicant is added to a loan, either as a source of financial support or as a guarantor. If the primary loan holder defaults on repayment, it will affect the co-applicant’s CIBIL. Your role as a co-applicant also means you are responsible for repayment of the credit taken, which can contribute to a low CIBIL score.

Low CIBIL Score Due to Insufficient Tenure

Your CIBIL score will show as 0 or -1 if you have just started using credit and do not have enough history to build a score.

  • Length of Usage: It takes 6 months to a year to establish a CIBIL score. CIBIL records all submitted applications, approved loans and credit cards. The usage and repayments updated in CIBIL during this period help to generate a numeric score.
  • Credit Mix: To obtain a CIBIL score, apply for a credit card with a security deposit or for one linked to a salary account with the Bank. Using unsecured credit, such as a credit card, and secured credit, such as a commodity or an Auto loan, can help improve a credit score.
  • Regular Usage: Active credit use is key to improving a low CIBIL score. Particularly if you have recently started your credit account. Positive credit transactions reported regularly by lenders to CIBIL will help to improve a low CIBIL score quickly.

What are the Steps to improve a CIBIL Score?

To improve your CIBIL score quickly, you must first check the details of your credit report. Apply for a copy of your CIBIL report by visiting www.CIBIL.com. Regularly reviewing your credit report helps you stay aware of your credit activity, identify errors early, and take action to resolve a CIBIL dispute, preventing score stagnation or decline.

  1. Review your CIBIL report carefully:

    CIBIL records customer data based on the following:

    • Name
    • Mobile Number
    • Date of Birth.
    • Residence Address.
    • PAN Number.

    A small error in the spelling of your name or a typo in the PAN card number can lead to the rejection of credit applications, and repeated attempts to secure credit can affect your credit score.

  2. Check Credit Report History:

    Your credit report or history is summarised as follows:

    • Active accounts.
    • Loans and credit cards
    • Overdue payments.
    • Credit card utilisation
    • Age of accounts.

    To improve your credit score quickly, a thorough review of your accounts for errors or incorrect entries is essential; if you find unpaid payments or pending accounts, raise a dispute with your lender and seek a resolution. Clearing these dues and obtaining a closure certificate can significantly boost your score.

  3. Close Pending Accounts:

    Pending credit accounts have unpaid dues, and closure is incomplete.

    • A small charge pending in your loan account can become an irritant by accruing interest and keeping your CIBIL score stagnant.
    • If there is a pending account in your CIBIL history, take steps to deal with it to improve your CIBIL score.
    • Repay the pending balance and obtain a closure certificate.
    • Closing a pending account will help to improve a CIBIL score quickly.

  4. Settled Accounts

    A settled account reflects that the principal loan amount has been repaid, but the interest factor is discounted.

    • A settled account is a negative marker on the CIBIL history.
    • With the interest waived off presently as a loss by the Bank, but still due.
    • If you have the funds available, pay the interest amount due to change the status to Closed.
    • A settled account that is repaid and closed will give a definite boost to your credit score.

  5. Reduce Credit Utilisation:

    Excess credit usage above the allowed FOIR makes you overleveraged.

    • Making a concerted effort to manage credit usage by keeping your utilisation ratio at or below 50% of your income.
    • Keep credit card spending below 40% of the allowed limit.
    • Avoid the use of Apps (Application loans).
    • Do not make multiple credit enquiries within a limited period, which can further lower your Credit score.
    • Apply for a Balance transfer to reduce your debt.

  6. Repay Debts on Time:

    Paying your Credit card bills on the due date and ensuring your EMI is cleared are responsible credit practices that are invaluable for building a CIBIL score. Each timely payment will help to improve the CIBIL score fast.

    • Pay credit card bills in full on the payment date and do not rotate credit.
    • Make sure the bank account has funds in advance to clear the EMI.
    • If a change is required to the ECS account, take steps in advance to update the mandate.
      A 12-month on-time repayment record is an ideal way to improve your credit score quickly.

  7. Get a fresh Credit:

    If you are new to credit or have not recently opened a new credit account, successfully adding one is a good step toward improving your CIBIL score.

    • If you get an offer for an increase in Your Credit Card limit, take it to rejuvenate your account.
    • Convert purchases of consumer durables on your credit card into EMI.
    • Get a personal loan against a fixed deposit for a short tenure if your CIBIL score is below 650 points.
    • Make a fresh start to improve your score by making your EMI payments on time.

How Long Does it Take to Improve Your CIBIL Score?

As per the Reserve Bank of India guidelines, lenders must update credit transactions with CIBIL every 15 days. CIBIL will record these transactions and reflect any changes, positive or negative, based on the customer’s credit behaviour. Every small action will contribute to your CIBIL score, and every effort to consolidate credit will be reflected in your score’s variation. Check the illustration below for the steps taken, the impact on your credit score, and the time taken to make a difference to improve CIBIL score fast.

Credit Repair Action Approximate score Improvement Time Frame
Rectify a CIBIL Error 30 to 50 points 30 to 45 days
Settled accounts repaid 40 to 60 points 45 to 90 days
Pending account closed 20 to 40 points 30 to 45 days
Credit Utilisation reduced 20 to 40 points 3 billing cycles
No Credit Enquiries for 6 months 10 to 20 points 6 months
Timely repayment of EMI for 12 months 80 to 100 points 12 months.

What Actions to Avoid to Prevent Your CIBIL Score from Dropping?

  • Do not delay payment of even a single EMI, as the default will always appear on your credit history.
  • Activate an auto-debit facility for your credit card payments, as CIBIL has noted delays.
  • Do not forward documents online without confirmation, as this can lead to multiple CIBIL enquiries.
  • Avoid applying for App loans; Banks will not issue further credit if you have excess App loans.
  • Do not ignore small pending amounts, as they can lead to debt accumulation and a low CIBIL score.
  • Keep vintage credit cards active, as the credit length will stabilise your CIBIL score.

FAQs

Conclusion

A low or stagnant CIBIL score can be improved. If you have been short on funds and have been unable to meet your obligations promptly, the situation can change. Conduct a review of your Credit history, make good on any pending payments, and manage any further credit you take responsibly.

At YourLoanAdvisors.com, our advisors are experienced in analysing CIBIL reports, what’s holding your score back, and helping you to get your CIBIL score back on track. If you have a low CIBIL score or are not improving, get in touch with us to help you achieve a landmark score of 750+. We will help you to improve your CIBIL score fast.

Need help to overcome a rejection? Contact us now or call us at 9811165183 .

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A clear lender policy now governs the financing of personal loans issued by banks and NBFCs. The process is streamlined, and the approval or rejection decision is communicated to the customer within 72 hours. Banks have their own criteria, but the personal loan rejection factors are similar across the board. If your personal loan is declined, the lender will state the personal loan rejection reasons. Check how to avoid a personal loan rejection by noting the rejection factors.

Not sure why your personal loan was rejected? Talk to our advisors at 9711165183.

Personal Loans Rejection Factors Explained

A personal loan is unsecured, and approval is based on the following key factors:

Employment

The employer plays a strong role in the approval of a salaried personal loan. Banks process personal loans for applicants employed by companies listed in the Bank’s Approved Company Category. If your employer is not approved or included in the negative list, it can be a reason for a personal loan rejection.

Personal Loan Criteria

The basic eligibility norms, such as age, income, a graduation degree, stability, and work experience, form an essential part of the personal loan approval process.

Documentation

To obtain an instant online personal loan, provide documents that are clear and valid. The salary slips and bank statements must be within the 3-month validity period. A discrepancy in the documentation will result in the rejection of a personal loan.

Loan Purpose

A personal loan is intended for individual use; do not apply for Use for Business or investment purposes, purchase of shares or mutual funds, or gambling or online wagers; these are personal loan rejection factors.

Verification Issues

The KYC process must be completed successfully, and a physical verification is required for approval of a personal loan. Submit your current residence address with a landmark. Provide an official email ID for employment verification. A failed verification can be the reason for a personal loan rejection.

The Credit score and CIBIL history

CIBIL(Credit Information Bureau of India Ltd.) is a pivotal player in the financial landscape, serving as the primary credit reporting agency. It receives customer data from banks, NBFCs, and other lending agencies, meticulously documenting details such as mobile numbers, PAN numbers, Aadhaar numbers, driving licenses, and other information lenders provide. This comprehensive and reliable record of your financial history is a critical factor in determining your creditworthiness.

Factors Affecting Low CIBIL Score

  • Pending Accounts

    It is not unusual to have a pendingloanthat you don’t remember opening or a Credit Card you’ve declined. Charges to the card can accumulate over time and appear as pending on the account. Dealing with the issue might seem like a hassle, but ignoring it isn’t the solution because it can affect your credit rating.

  • Credit Card Outstanding

    Most Credit Cards , including the ICICI Bank Coral Credit Card, have a payment cycle of 30 days. If unable to pay the due amount, the option to pay at least 5% must be availed. Non-payment or delayed payment of a Credit Card is noted in your credit history. Non-payment for 30 days or more is a red flag that inversely affects the Credit Score .

  • Delayed or Non-Payment of EMI

    The impact of delayed or non-payment of EMI is significant, as it can affect your credit history. If insufficient funds are in the account, the EMI will return unpaid. Transfer funds to your account immediately, as the bank will make a second attempt and present the EMI after 48 hours. If the instalment remains unpaid, finance charges are levied, and the delay is reported to CIBIL .

  • Settled Credit accounts

    Are you unable to repay your Loan instalment or credit card bill? The lender will contact you to remind you of the due payment. If the EMI remains unpaid, the delay is reported to CIBIL . If the customer cannot make good the loan amount plus accrued interest, an offer to settle the loan will be made. A settlement involves paying the principal amount without interest. Settled credit accounts are one of the major reasons for a low CIBIL score.

  • Unpaid Loans

    Mortgage EMI payments that are not made for a while may lead the lender to repossess the property or vehicle. For unsecured funding, such as aPersonal Loanor aCredit card, if a balance is due, the bank will try to contact the customer to collect payment. The days past due are regularly reported to CIBIL. Finally, it is reported as a delinquent account that has been written off. A Delinquent account is a significant default and will lower your CIBIL score.

  • Multiple CIBIL Enquiries

    Choosing the right bank for a Credit Card or a Personal Loan is crucial. Applying to too many Banks is not a good idea, as each lender will send an independent enquiry to CIBIL to check the credit score and history. CIBIL , in turn, deducts 10 points. The additional enquiries raised indicates that the customer may be taking credit from multiple banks, which may lead to repayment issues.

How to raise your CIBIL score?

How Low CIBIL Score/ history Causes Personal Loan Rejection

When processing a personal loan, the lender will first forward an enquiry to CIBIL. Your CIBIL score is a major factor in determining your eligibility for a personal loan, and a healthy CIBIL score of 750 points or above is the key to getting an instant personal loan.

If your score is below the required benchmark and you apply for an HDFC Bank personal loan, the Bank will review the reasons for the low score. CIBIL records credit usage details, including loan and credit card histories and repayment status. The following CIBIL defaults can be the personal loan rejection reasons:

  1. Excessive Loans

    The CIBIL details of the applicant reflect the customer’s outstanding loan and the EMI paid. If with an additional loan the EMI payments are above the allowed FOIR (Fixed obligations-to-income ratio ) and unaffordable according to your monthly income. The Bank will decline the personal loan application as the customer is overleveraged.An illustrated example of exceeding the FOIR

    Applicant Details
    Monthly salary: ₹ 50,000/-
    Eligible FOIR: 50%
    Current debts
    Home loan EMI: ₹ 15,000/-
    Existing personal loan EMI: ₹ 4,000/-
    Auto Loan EMI: ₹ 4,000/-
    • Mr Kumar is employed with a Private Limited Company. He applied for a personal loan to HDFC Bank, as depicted above, with a monthly income of ₹50000/- credited to his account. He was currently paying a total EMI of ₹23,000/-.
    • He applied for a personal loan of ₹ 400000/- for home renovation, as per the interest rate of 12%, with a tenure of 48 months, his EMI would be ₹10533.53/-
    • His personal loan request was denied, as, with the additional EMI, his total obligations would be ₹33,533/-, exceeding the FOIR of 50%.

  2. Application (App) Loans

    Customers in urgent need of funds resort to App loans, and the ease of processing via a digital interface leads customers to apply for multiple loans. The high interest rates charged on App loans can increase outstanding balances. If there are excessive App loans on an applicant’s credit history, the personal loan request is denied.

  3. Recent Personal Loans

    All credit taken is reported to CIBIL. Primary Banks, such as HDFC Bank and ICICI Bank, will not grant you additional funds as a fresh personal loan or a personal loan top-up if you have received a personal loan from an alternate Bank or NBFC within the last 3 months. If you make additional attempts to apply, the number of enquiries will further lower your CIBIL score.

  4. Credit Card Dues

    If the customer does not pay the full credit card bill, the balance is carried forward to the next cycle. A penal interest of 35% to 40% per annum is charged on the outstanding amounts. If a customer’s outstanding credit card balance exceeds 5 times their drawn salary, the personal loan application is rejected due to existing customer obligations.

How to Avoid Personal Loan Rejection?

Taking precautionary steps before applying for a personal loan will help you fulfil your personal loan needs satisfactorily. To avoid a personal loan rejection, note the following personal loan rejection factors:

  • Check your CIBIL score

    A self-check on www.CIBIL.com or through any App such as Google Pay will show you that you have the benchmark score of 750+ required by Banks.

  • Eligibility Criteria

    The eligibility criteria of the lender must be met, such as the job experience required, and your employer must feature in the Approved Company Category list of the Bank.

  • Loan Amount

    Apply for a loan amount as per your financial eligibility. Before applying, use our personal loan eligibility calculator to confirm the Loan amount you can be approved for.

  • Clear Credit Card debts

    Clear your credit card debts before applying for a personal loan. If your credit card bills exceed your credit limit, the lender will consider you over-obligated.

  • Provide complete Documents

    Check that your documents are valid and complete to avoid a personal loan rejection due to incomplete documentation. Keep originals ready for a VIDEO KYC process.

  • Bank Balance

    Maintain a healthy average balance in your salary account, which confirms the easy payment of the new EMI. A personal loan will not be approved if there is a bounce in the last 3 months of your banking record.

  • Self-owned residence

    Weightage is given to the stability factor. If you live in a self-owned or family-owned residence, providing proof will help you avoid a personal loan verification decline.

  • Calculate eligibility

    Use the eligibility calculator to check the loan amount you are eligible for. Applying for an excessive amount will lead to a personal loan rejection.

In case you have an urgent need for funds, contact us at www.yourloanadvisors.com to help you apply to a suitable lender and fulfil your personal loan aspirations.

What Steps to Take After Personal Loan Rejection

A personal loan rejection is a setback, but not the end. Personal loan rejected, what to do? The first step is to verify the reason for the personal loan rejection and address it.

  1. Check errors in the CIBIL report

    If the personal loan is rejected due to an incorrect entry in your CIBIL report, the error needs to be rectified. Follow the steps to resolve the error and “how to improve CIBIL score fast”.

  2. Improve your CIBIL score

    If your CIBIL score range has fallen below the required benchmark, make timely EMI repayments and take steps to build your credit score

  3. Policy declines

    If your personal loan request is rejected due to a job profile or your company not being included in the Approved Company Category list of the Bank, apply to an NBFC or to the Bank with which you have a salary account.

  4. Reduce debt

    If your current debts exceed the allowed FOIR calculation, consolidate your loans via a Personal Loan Balance transfer, and clear your credit card bills to increase eligibility for the loan amount required

  5. Verification

    If the address is untraceable or the applicant is not contactable, the personal loan is declined, and the applicant may request re-verification by providing additional information.

  6. Out of Limit

    Banks and NBFCs have designated locations for processing personal loans. Do check whether your personal loan has been rejected due to a negative area or an out-of-city location. Apply to an alternate lender that approves the location.

  7. It is advisable to wait 3 months before reapplying so that the CIBIL enquiries do not exceed the allowed benchmark.

Conclusion: Automated online processing and communication have enabled the “online instant personal loan”. We at www.yourloanadvisors.com offer personalized services to our customers and help them identify the factors that lead to personal loan rejection before processing their personal loan requests. Our advisors guide personal loan applicants to ensure their documentation is in order and that the lender’s eligibility criteria are met, so they can fulfil their personal loan requirement successfully.

FAQs on Personal Loan Rejection

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Has your personal loan been declined due to a low CIBIL score? A rejection can throw you off balance, particularly in an emergency. The importance of tracking your CIBIL score cannot be overstated, as delaying an EMI payment or overspending on your credit card can lead to a low CIBIL score. A CIBIL score is a numeric score generated by CIBIL (Credit Bureau of India Ltd) that tracks your credit dealings. A high CIBIL score helps you secure the lowest interest rates and suitable terms for your loan, whereas a low CIBIL score can put you in a spot when you need credit urgently.

What Counts as a Low CIBIL score?

The numeric score range is 300 to 900 points. A low CIBIL score is relative, and banks have their own sourcing benchmarks. A CIBIL score of 750 points is required to be granted credit, and a score below 650 points is considered low. If you have a low CIBIL score, you may face the following issues:

  • Difficulty is securing a Personal Loan.
  • Secure loans are granted at a higher interest rate.
  • Lower limits assigned to credit cards.

The CIBIL score is generated based on an individual’s credit transactions. A score is allotted based on the following Credit behaviour patterns:

The percentages allotted by CIBIL

Credit Usage and history 35%
Existing Credit Utilisation 30%
Credit Mix 15%
Credit vintage 20%

Key Reasons for a low CIBIL score

Keeping a tab on your CIBIL score is necessary. You can check your CIBIL score online from www.CIBIL.com, from your Bank account or through a payment App. If the decline in your CIBIL score has come as a surprise, you need to check the reasons for the low score. The major reasons for a Low CIBIL score can be classified as follows:

Credit usage and credit history

The credit history accounts for 35% of the CIBIL score: previous credit usage and repayment records are a mark of your credit management and will significantly affect your CIBIL score. Timely repayment of credit will add to your credit score. The following lapses can be the reason for a low CIBIL score:

  • Delayed payment of EMI: The instalment for your loan repayment is deducted from your bank account on the scheduled date. If there are insufficient funds in the account, the transaction will be returned unpaid and recorded as a bounce in your CIBIL history. A history of delayed loan repayments will downgrade your CIBIL score.
  • Non-payment of Credit card bills : A credit-free period of 40 to 50 days for credit card usage is allotted by most Banks. A payment statement is generated for the amount due by the due date. Non-payment of the bill or of the minimum amount of 5% is reported to CIBIL, and the delay is further recorded in buckets of 30, 60 or 90 days.
  • Pending Accounts. The repayment of loans must be completed and confirmed with a no- dues certificate from the Bank. All pending accounts will incur interest, remain on the CIBIL history, and prevent the CIBIL score from increasing. If not paid, it will be marked as delinquent over time.
  • Settlement of pending dues : Customers unable to make timely repayment of dues may opt for a settlement. A settlement involves payment of overdue amounts without interest. The Bank treats it as a compromise rather than a payment in full. A settled account is viewed unfavourably and is a major reason for a low CIBIL score. A settlement is not a good option, as the account will be classified as being in default.

Existing Credit Utilisation

Past discrepancies can be overlooked if the customer is diligently repaying current credit dues. CIBIL allocates 30% of the score to an individual’s current credit utilisation. The customer’s current credit usage reflects their current financial stability. Take note of the following, which can be reasons for a low credit score.

  • EMI returns or bounces: A return of a loan instalment or a bounced cheque for a credit card payment will hit your CIBIL score and be recorded in your CIBIL history. Prompt repayment is essential, though you may not be issued further credit for the next three months.
  • Excess utilisation of Credit: A balanced usage of credit, up to 60% of monthly income, is an ideal ratio. Excess credit appended suddenly from multiple lenders and Application loans indicate that the customer’s liabilities are stretching his income. The repayments can become unaffordable, increasing the risk of delays. The CIBIL will also reflect that the customer is “Overleveraged”.
  • Maximised Credit Cards Usage: Credit cards are handy payment options with a credit-free period of 30 to 40 days; payments for spending must be made on the due date, failing which a high interest rate of 36% to 40% is charged. Overuse of credit cards and failure to clear bills promptly signal financial stress and lead to a decline in the CIBIL score.

A mix of Credit Usage

Customers using a mix of secured and unsecured credit are likely to have a stable CIBIL score; using only mortgages, auto loans, or credit cards will not give the CIBIL score the required boost. 20% of your CIBIL score is allotted to the credit mix.

  • Unsecured Credit: An unsecured credit card or a personal loan is provided free of collateral. Responsible usage gives the lender confidence and helps build a credit score quickly.
  • Secured credit: Repaying a mortgage is a long-term responsibility for a customer. Home loans with a tenure of 20 years or more allow CIBIL to assign scores based on the vintage of credit usage and timely repayment.

Insufficient Credit history

The CIBIL score is based on a customer’s credit behaviour over time. It takes 6 months to 1 year for CIBIL to generate a reasonable score. 20% of the score is allocated to building a credit history through regular credit use and timely repayments.

Too many CIBIL Enquiries

Each time you apply for credit, the lender will send an inquiry to CIBIL to review your CIBIL score and history; each inquiry will lower your CIBIL score by 10 points. For example, if you apply to 3 lenders simultaneously for a personal loan, your CIBIL score is hit by 30 points. More than 3 to 4 inquiries in the past 3 months can lead to the rejection of a credit card or personal loan request.

Errors in the CIBIL report

Regular credit usage and timely EMI payments, and still facing a personal loan rejection? You need to check your CIBIL history for errors; the error could be due to a wrong report sent by a lender or a clerical error by CIBIL. Retrieve your CIBIL report to check for wrong entries that could be the cause of a Low CIBIL score. Take steps to rectify your CIBIL score.

Reasons for Credit Delays and Defaults that impact a CIBIL Score

Delays and defaults in repaying credit taken are due to the simple shortage of funds or for other reasons, notable are the following;

  • Change of the ECS mandate bank account: If your salary account changes, the Bank should be informed in advance, and a request for a change of the ECS mandate should be made. If the Bank is not notified in time and there are insufficient funds, the EMI will return unpaid and will reflect in your credit history as a bounce.
  • Loss of Employment: If you are unemployed, without a regular salary, it is advisable to arrange funds from other sources and maintain a sufficient balance in your account to clear the EMI . If you have outstanding credit card debt, pay the minimum balance by the due date to avoid default.
  • Delay in salary credited: The EMI will be credited to the salary account on the due date. If the employer does not credit your salary on the assigned date, the EMI will be marked as unpaid. It is advisable to keep one month’s instalment as an advance, in case the salary credit is delayed.
  • Unable to manage finances properly: If the expenses have increased due to unplanned expenditures, and you have made extensive usage of your credit card, individuals who are unable to manage their finances in such situations are liable for default.

What steps can you take to improve your CIBIL score?

  • Reset of your Credit records: You cannot change your past credit history as recorded by CIBIL , but you can always work at making a fresh start.
  • Try to clear the previous debt: If your financial situation improves, it is the best solution to repay the amount due and clear your debts. Repaying the outstanding amount, including interest, will close the account and improve your CIBIL score.
  • Restart your history with commodities: Start rebuilding your score by purchasing commodities with your Credit or Debit card , convert the spend into EMI , and make sure you repay the instalments on time.
  • Apply for a secured credit: a Gold Loan or a Loan Against Property , which requires a lower CIBIL score due to the security provided, can help you get the finance you need and improve your CIBIL score.
  • Look for a successful relationship: A lender with whom you have a salary account, with a good average bank balance. Your CIBIL score may be overlooked as you have maintained a good repayment record with the lender.

Conclusion: Your CIBIL score calculations are not rocket science, but a follow-up and a consolidated report of your credit usage. A clear understanding of the CIBIL score ratings, as given above, will help you to avoid a Low CIBIL Score.

Frequently Asked Questions

Customer story: Reasons for a low CIBIL score

Customer name: Rupali Singh

Age: 35 years

Income: ₹80,000/-

Employer: Tata Consultancy Services

Designation: HR Consultant

Marital Status: Married

Her Existing Credit Usage included:

1. Credit Card: ICICI Bank Rubyx Credit Card | Limit: ₹ 1.5 Lakhs

2. Auto loan: Amount: ₹700000 | EMI: 17922

  • Rupali is a Human Resources executive earning a high income. She applied for a personal loan of ₹5 lakh to renovate her home.
  • She was surprised that she was not issued the loan amount she required due to her CIBIL score, which was 680.
  • This came as a surprise, as she had been paying her Auto loan EMI regularly and paying her credit bills on time.
  • She contacted us through our website, www.yourloanadvisors.com, to help resolve the issue.

The discrepancy in the Credit History:

  • We asked her to retrieve her Credit records by sending a request to www.CIBIL.com .
  • On checking her credit history, we found pending credit card dues of ₹ 50,000/-

We asked her if she had used an additional card previously. She remembered she had used an HDFC Card, which she had closed because of its low limit. She was sure she had paid all the dues, but did not receive a closure letter.

The Resolution:

  1. We guided her to contact the Bank’s customer Care and request the payment details for the credit card in her name.
  2. As per the Bank guidelines, a payment was pending on the card, which had now been inflated by interest.
  3. Rupali was apprehensive about paying the inflated amount, but we advised her not to accept a settlement, as it would always reflect on her credit history.
  4. She requested that the Bank allow her to clear the amount in installments.
  5. With each installment paid, her CIBIL score began to revive. Soon, she cleared the entire amount and received her closure letter.
  6. Her CIBIL history now shows her credit card account as closed, and her CIBIL score is back on track!

Conclusion: Always request a no-dues certificate from the lender after repayment of a loan or closure of a credit card, as any unpaid dues can mount and lower your CIBIL score.

 

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Banks issue secured and unsecured loans to customers for specific needs, the foremost criterion being the ability to repay the loan on time. To monitor individuals’ credit behaviour, credit agencies compile data on all loans, credit cards, and other lines of credit. The most authentic of these is CIBIL in India, the Credit Information Bureau of India Ltd. Lenders look for customers with a sound credit history and a good CIBIL score. This write-up will help our esteemed customers understand ‘what is a CIBIL score’ and the details of the CIBIL Score.

What is a CIBIL Score and Why is it Important?

The CIBIL Score has become a priority for Banks and NBFCs; further credit is granted based on the applicant’s credit report, and an individual rating is assigned to an individual based on the performance of the various credit lines used by TransUnion CIBIL, reflecting creditworthiness.

Every time a Bank receives a loan or credit card request, an enquiry is forwarded to CIBIL to obtain the individual’s CIBIL score and history. A higher credit score means that you are a more reliable borrower, and lenders have to bear a lower risk while lending you money. Applicants with a CIBIL score of 750 or higher are offered higher loan amounts with better terms and conditions.

What is a CIBIL Score Range and What Does It Mean?

The CIBIL Score range is 300 to 900; scores closer to 900 indicate a low risk, while scores closer to 300 indicate a high risk.

CIBIL SCORE RANGE SIGNIFICANCE CREDIT QUALITY
Below 300
Below six months of credit usage
Very Poor
300 – 550
Low score not eligible for credit
Poor
550 – 620
Credit issues. Poor credit history
Fair
620 – 700
Needs improvement and steady usage to rectify.
Average
700 – 750
A workable score can be applied for credit.
Good
750 – 800
A good credit score is the benchmark required by Banks.
Very Good
800 – 900
Optimum score with an impressive credit history.
Excellent

Score Band Significance
CIBIL Score of 0 Denotes NIL Credit Usage.
CIBIL Score of -1 Insufficient length of Credit usage below 6 months
Below 300 Below six months of credit usage
300-550 Low score not eligible for credit
550-620 Credit issues. Poor credit history
620-700 Needs improvement and steady usage to rectify.
700-750 A workable score can be applied for credit.
750- 800 A good credit score is the benchmark required by Banks.
800-900 Optimum score with an impressive credit history.

CIBIL Score Requirements for Personal Loan

  • A stable credit and a CIBIL score range of 750+ are required to apply for an unsecured, collateral-free personal loan.
  • Applicants with a 0 or -1 CIBIL score can apply for a personal loan to HDFC Bank/ ICICI Bank if they meet the eligibility criteria.
  • The CIBIL score requirement differs from lender to lender and depends on the terms.
  • Banks accept a lower CIBIL score if the applicant has a credit relationship or applies based on a fixed deposit held.

What is a CIBIL Score for Secured and Unsecured Credit?

  • Banks consider the CIBIL score and history when processing all credit lines, secured and unsecured loans.
  • A personal loan and a credit card are unsecured and provided based on a customer’s profile; therefore, emphasis is placed on a high CIBIL score and the customer’s credit history.
  • A secured loan, such as a home loan, a loan against property, or a vehicle loan, is secured by a mortgage. It may be easier for a customer to get a secured loan with a lower or nil CIBIL score.
  • Banks may consider a mortgage request for an applicant with a below-average CIBIL score of 650 points and above, but applicants with a delinquent record or settled loans will have to apply to an NBFC.

Read More : NBFC Vs Bank Personal Loan

Have the CIBIL Score Requirements Changed?

  • The CIBIL Score has become a priority for Banks and NBFCs, as keeping delinquencies and defaults below the acceptable percentage is essential.
  • With the introduction of online credit platforms, application loans, and the granting of licenses to new NBFCs, the options for customers to get instant credit have increased the risk of customer defaults.
  • The acceptable CIBIL benchmark has increased from 720 points to a minimum of 750 points, which is required to get an ICICI Bank credit card or an HDFC Bank personal loan.
  • Banks check the customer’s credit obligations and CIBIL history for personal loan eligibility. If the customer’s existing dues exceed the FOIR, the request for additional credit is declined.

Can you get a Loan without a CIBIL rating?

  • Personal loan applicants and credit card seekers can apply without a CIBIL score to a Bank that accepts a 0 or -1 CIBIL score, provided they fulfil the other eligibility criteria.
  • Customers who are new employees or who have a salary account with the Bank are issued a personal loan without a credit rating. Though the credit limit or loan amount issued will be limited.
  • Applicants over 30 years old without a CIBIL score are viewed negatively, and lenders assume they have changed credentials to cover a default.
  • Secure loans such as Home Loan, Loan Against Property, or Vehicle Loan are granted without a CIBIL score if the applicant has stable employment and residence.

Can You Get a Loan with a Lower Score?

  • It may be possible to get a loan against security rather than an unsecured loan if you have a lower CIBIL score.
  • Apply to an NBFC willing to issue the loan amount you require, but charge a higher interest rate.
  • Work on improving your CIBIL score by repaying debts on time and rebuilding your score

Practices that Impact a Credit Score

1. Honour the payment due date for the credit taken.

  • Be vigilant about the due date for your Credit Card dues or the EMI for your loan.
  • Ensure there are sufficient funds in your salary account to clear the EMI on the scheduled date.
  • If there is a lapse, make the payment as soon as possible.

2. Do not apply for credit indiscriminately.

  • 10% of the CIBIL score is allotted to the number of enquiries received from lenders.
  • Check eligibility criteria and interest rate before applying for a loan or credit card.
  • Each credit enquiry by a lender will negatively impact your score by 10 to 15 points.

3. Maintain a Healthy Mix of Secure & Unsecured Credit

  • A secure loan, a loan against property, or a Home Loan with a vintage adds stability to your Credit Score.
  • Unsecured credit, such as a personal loan or a credit card, can help boost a credit score quickly.
  • All credit accounts that have been repaid on time and closed successfully add to the CIBIL score.

What is a CIBIL Score for Personal Loan Eligibility?

  • The CIBIL score check has become a mandatory eligibility criterion for the personal loan process.
  • A self-check at www.CIBIL.com before applying for a personal loan will help confirm eligibility, without negating the score.
  • A CIBIL score of 750 or higher will ensure approval from most Banks.
  • If your CIBIL score does not meet the benchmark, check for a suitable lender before applying.

Read More: Personal Loan Eligibility

Frequently Asked Questions

In conclusion, with our policy of ‘Customer First,’ we at www.yourloanadvisors.com prioritise understanding our customers’ profiles, credit histories, and needs. If the CIBIL score is not up to the mark, we offer them relevant options and help them to apply to the most suitable Lender. Over the years, we have helped and guided customers to fulfil the Personal loan eligibility criteria before applying, so they are granted the funds they need. Get in touch with us if you need help deciphering your CIBIL score and improving it!

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Applying for a personal loan is now quick and simple, but it cannot be assumed that you will be approved for the loan amount you need. Enumerated below are the key features and know-how on Personal Loan eligibility that have been explained for your assistance.

A personal loan for salaried individuals has become the most popular choice for funding lifestyle expenses and emergencies. The ease of online applications and quick processing has made personal loans more accessible. A personal loan is issued based on the applicant’s eligibility. The primary considerations for personal loan eligibility are

  • Applicant’s Income
  • Monthly salary credited to the bank account
  • CIBIL score
  • Existing liabilities (debt, credit card dues, etc)
  • Employer’s category as per the HDFC Bank-approved company list for personal loans.

Banks and NBFCs provide personal loans ranging from 1 lakh to ₹₹ lakhs. Loan amounts are determined by the applicant’s profile and the lender’s policies. Given below is an illustration of the minimum and Maximum Loan amounts offered by Banks and NBFCs.

Personal Loan Eligibility Calculator

What is the income required for personal loan eligibility?

The minimum income threshold required by banks and NBFCs varies by lender and applicant location. The income determines the loan amount the applicant qualifies for, the interest rate applied, and the relevant FOIR.

  • Applicants with a Salary of ₹ 20k+ are eligible from Tier 2 and Tier 3 cities, as well as INCRED Finance.
  • Applicants with a Salary of ₹ 25k + can apply to YES Bank, select NBFCs, SMFG Finance, and Poonawala Finance.
  • Applicants with a salary of ₹ 30k+ are eligible to apply for a personal loan with HDFC Bank and AXIS Bank.
  • ICICI Bank requires a minimum salary transfer of ₹ 40k+ to process a personal loan.
SALARY BANK/NBFC LOAN AMOUNT INTEREST RATE
> ₹ 20,000 INCRED Up to ₹ 3 Lakhs 25% -30%
₹ 25000 + YES Bank, SMFG Finance, NBFCs Up to ₹ 4 Lakhs 15%- 25%
₹ 30,000 + HDFC Bank, AXIS Bank, KOTAK Bank Up to ₹ 7 Lakhs 12% – 14%
₹ 40,000 + All Major Banks Up to ₹ 10 Lakhs 10% – 12%

What are the exceptions made by financiers for salary credits?

  • AXIS Bank accepts salary credits of ₹20k or more for an AXIS Bank salary account holder.
  • Applicants employed with companies that do not appear on ICICI Bank’s approved company list should have a regular salary credit of ₹ 1 lakh or more.

Suggested Read : Personal Loan Eligibility Based on Salary

How much EMI am I eligible to pay?

Banks consider your income and expenses to determine your EMI, helping you feel more in control of your loan options. Applicants can calculate their EMI using the EMI Calculator before applying for a personal loan to get an idea of the amount they can comfortably pay towards the monthly instalment. Banks and NBFCs most widely use the FOIR method to confirm an applicant’s eligibility to pay EMI.

The role of the FOIR (Fixed obligations versus Income)

The FOIR determines the maximum monthly EMI the applicant can afford. The fixed obligations include fixed monthly costs, existing loan EMIS, and credit card dues, all of which are deducted from the income.

The formula used to calculate the FOIR.

Total Monthly Obligations/ Net monthly income * 100 = FOIR.

Example:

  • EMI for Loan and Credit card obligations = ₹ 30,000/-
  • Net Salary = ₹ 60,000/-
  • FOIR = 0.5% * 100 = 50%

The above is the general rule for further processing the FOIR application; salaries have been segmented as follows.

SALARY FOIR Maximum EMI Allowed Tenure
₹ 20,000 to ₹ 40,000 40% to 50% ₹ 8000/- to ₹ 10.000/- 12 months to 60 months
₹ 40,000 to ₹ 75,000 50% to 60% ₹ 20,000/- to ₹ 40,000/- 12 months to 60 months
₹ 75000+ 70% ₹ 45000/-+ 12 months to 72 months

Key features of the FOIR include

  • High-income applicants have higher disposable income after accounting for monthly expenses and are thus allotted a FOIR of 70% to 75% of their monthly income.
  • Companies included in the upper tier of HDFC Bank’s company category list, such as Elite Super A and Cat A companies, are given additional leverage.
  • Companies listed as Category C and D are allotted lower multipliers and are eligible for lower personal loan amounts, which are capped.

Suggested Read: How to reduce current EMI ?

How does employment influence the Personal Loan eligibility?

The stability and reputation of your employer significantly influence your Loan eligibility, as banks prefer to lend to employees of established, profitable companies with consistent employment records.

Profile of Employer

Lenders look to fund employees of established companies with increased profitability, infrastructure, and employment. Employees of companies that are Limited, Private Limited, PSUs, and Government organisations are eligible for personal loans from most banks and NBFCs. In contrast, employees of proprietorship and partnership firms are not.

Company Category

Applicants whose employer is listed in the Approved Company Category list of Banks are eligible to apply for a personal loan, such as:

  • HDFC Bank Company Category List.
  • ICICI Bank List of Approved Companies.
  • AXIS Bank Approved Company List.

Companies that feature in the upper tier of the list, such as CAT A or Super A companies in the HDFC Bank Company Category List, are allotted higher multipliers for calculating eligibility for Personal Loan amounts than CAT C or CAT D companies.

AXIS Bank and ICICI Bank also apply a higher FOIR of up to 70% for the Loan amount eligibility for Personal Loans.

Vintage of Employment

A work experience of 12 months or more is required to be eligible to apply for a Personal Loan. New appointees are issued restricted loan amounts, while Employees with vintage work experience are considered stable and secure and can be awarded a Personal Loan of ₹10 lakhs or more.

Salary proof

With the onset of Digital banking systems, banks now require a direct salary transfer to the salary account regularly for a period of 3 months or more to apply for a personal loan. Proof in the form of a Bank statement reflecting salary credits is required when applying.

Key Features of the Tenure affecting the Personal Loan eligibility

The repayment term for a Personal loan or Tenure ranges from 12 to 72 months.

Longer Tenure

A longer tenure can give you a sense of control, increase your eligibility, and make monthly payments more manageable. Applicants employed with the listed companies are issued an extended tenure of up to 84 months.

Shorter tenure

Applicants who wish to repay their Personal Loan sooner can opt for a shorter tenure, thereby saving on interest. The condition is that the EMI does not exceed the Bank’s debt-to-income ratio limit.

Illustration of the EMI calculation based on the tenure

  • The EMI payable by the applicant depends on the repayment tenure. If the applicant requests a shorter tenure, the eligible loan amount decreases. If the EMI exceeds the FOIR, the tenure can be extended or the loan amount reduced, for example:

(Hypothetical customer details)

  • Customer name: Archana Singh.
  • Age: 35 years
  • Employer: TELEPERFORMANCE GLOBAL SERVICES PRIVATE LIMITED (Listed as CAT B in the HDFC Bank Company Category List)
  • Marital Status: Married
  • Salary Account: HDFC Bank.
Net Salary ₹ 60,000/-
FOIR Applicable 55% ₹ 35000/-
Current Obligations
Existing Home Loan EMI ₹ 20,000/-
Credit card outstanding ₹ 50,000/-
5% of outstanding credit card balances are treated as obligations.
Current Obligations total ₹ 22500/-
Eligible to pay an EMI of ₹ 12500/-

Eligibility Calculation with varied tenure

(Interest Rate applicable at a monthly reducing balance)

Tenure Interest Rate EMI Maximum Loan amount
60 months 10.50% ₹ 12,896.34 ₹ 6,00,000
48 months 10.50% ₹ 12,801.69 ₹ 5,00,000

Existing Liabilities

  • The customer’s existing obligations or liabilities are noted by retrieving the CIBIL report and reviewing the Bank Statement. The personal loan amount approved is finalised after deducting the obligations.
  • The EMI paid for the existing loans. If the customer is a co-applicant on a loan, banks will consider 50% of the EMI as the customer’s obligation. Certain NBFCs may not include the obligations as a co-applicant for calculating the Personal Loan eligibility.
  • If the App’s (Application loans) obligations exceed the Lender’s limits, the Lender will declare the customer overleveraged and decline the personal loan request.
  • All credit dues, whether as a primary or an add-on cardholder, form part of the obligations. 5% of the credit card dues are included in the liabilities. If the pending card dues reflected in CIBIL are over 5 times the monthly salary, the personal loan request is declined.
  • Salaried applicants nearing retirement age (62) are offered a limited tenure, which restricts their eligibility for a higher loan amount. Younger applicants working in listed companies are allotted longer tenures and higher Personal Loan amounts.
  • If the applicant resides in a self-owned or family home, the applicant’s personal loan eligibility will increase in the absence of a rent liability.

CIBIL

  • The trust factor for an unsecured Personal Loan increases with a CIBIL score of 750 or above. This can boost your confidence, as banks feel more assured in offering higher loan amounts for maximum tenures.
  • Customers who are first-time loan seekers without a CIBIL score are allotted an apprehensive loan amount. A CIBIL score is required for Customers aged 35 or older to be eligible for a personal loan.
  • If your CIBIL score is below 650 points, it is advisable to improve your CIBIL score before applying for a Personal loan to avoid rejections and further damage to your CIBIL score.

How to improve your Eligibility for a Personal Loan

Consider the following factors to increase your eligibility;

  • Maintain a CIBIL score of 750+ and repay all your Credit Card dues.
  • Pay back and close any pending loans and those nearing the end of their tenure.
  • Include all sources of income and the income of an earning spouse or parent.
  • Apply to the Bank with a salary account or a successful credit repayment record.
  • Do not make multiple inquiries at once, as you may be branded as credit-hungry.
  • Consolidate multiple loans via a balance transfer to improve FOIR.

Check out a Live example of increasing eligibility with the assistance of www.yourloanadvisors.com

Nitin Khanna (Name Changed for privacy) contacted us via our website for assistance, as he urgently needed funds of ₹ 400000/- lakhs for his wedding celebrations. He is employed with a company listed as CAT B in the HDFC Bank company Category list, with a salary of ₹ 3500/- transferred to ICICI Bank.

His personal loan request to ICICI Bank was declined due to overleveraging. Given below are his financial details:

Income ₹ 35000/-
FOIR applicable 50% 17500/-
Home Loan EMI 13000/-
Eligible to pay EMI of 4500/-
  • He was considered overleveraged due to his home-loan EMI obligations.
  • We further enquired about the status of his co-applicant on the home loan.
  • He revealed his father was a co-applicant who was earning a salary of ₹ 50,000/-
  • As his father was an earning co-applicant, we asked the Bank to reconsider his request and submitted his father’s documentation as proof.
  • As per policy, banks treat 50% of the home loan EMI as an obligation if the applicant has a regular income.

His eligibility calculations with 50% of the home loan EMI obligated were now as follows;

Income ₹ 35000/-
FOIR applicable 50% 17500/-
Home Loan EMI 6500/-
Eligible to pay EMI of 11000/-

Thus, his request was reconsidered and sanctioned for:

Loan Amount Required ₹ 400000/-
EMI for 48 months 10338.21

Usage of the EMI Calculator for Personal Loan Eligibility

The EMI calculator is a useful tool that helps you calculate the EMI for the loan amount you require. Key inputs include:

  • The Principal Loan amount required.
  • The interest rate.
  • The tenure.

Thus, you can confirm the EMI to be paid for the personal loan amount required before applying for a Personal Loan. This will help you check whether the EMI is affordable, and if the EMI is too steep to pay along with the other existing credit and expenses, you have an option to:

  • To ask for an extended tenure.
  • Apply for a lower Personal Loan amount.
  • Check with other lenders for a lower interest rate.
  • Consolidate your existing debt.

Frequently Asked Questions

A personal loan is a fast and flexible funding option for individual needs. Most lenders now process personal loan applications online and complete them within 72 hours.

After a personal loan is approved, the customer is informed of the loan terms. If the customer agrees, the disbursement process begins, and the funds are credited to the customer’s account via ECS (Electronic Clearing Services). 

Once the customer is reassured that the loan amount is approved and he will receive the funds, he may overlook the importance of gathering key personal loan documents for future transactions. Customers need to review the lender’s loan documents and note the terms that will affect costs and the overall process. Listed below are the key documents customers must retrieve and have in safekeeping. 

The Personal Loan Agreement. 

The Personal Loan agreement is a legally binding document for both parties. Upon approval of the personal loan, the customer must accept the terms and sign the agreement before the lender releases the funds.   

Banks offer online disbursal systems so that customer can access the Loan Agreement, review the loan terms, and sign it electronically. This helps reduce paperwork and expedite processing. 

The Personal Loan agreement includes the following:

Significant terms to be noted in the Agreement include:

What is the Importance of the Personal Loan Agreement?

The personal loan agreement is not just an instrument to receive your loan amount; reading the terms carefully will alert you to your obligations and the penalties involved. The lender is also responsible for fulfilling the terms set at disbursement and cannot deviate from them. It is advisable to hold a copy of the agreement for ready reference till the full term of the loan expires.

The Sanction Letter.

The sanction letter is the first formal communication the customer receives regarding the approval of the Personal Loan request. Once the application is processed and a final decision is made, the loan amount and terms are finalised. The sanction letter contains the loan details, and at this stage, the customer can request a review of the loan amount if additional funds are required or if they decide to borrow a lower amount.

What are the Contents of the Sanction letter?

Once the customer accepts the terms of the sanction letter, the Lender will initiate the disbursement or the repatriation of funds. The Sanction letter details the following information:

What is the importance of the Sanction Letter?

If the applicant does not disburse the approved loan amount within 30 days, the sanction letter is declared invalid. On expiry of the sanction letter, the applicant will have to reapply and submit the required documents for the loan again.  The entire process is reinitiated as if for a new loan. It is beneficial to sign the agreement and initiate disbursal of your personal loan within 30 days, as there is a chance that, if you reapply, you may not be awarded the same terms.

The Amortization schedule.

After your Personal Loan is disbursed, loan repayments take precedence over other payments. The amortisation schedule helps you take a closer look at your loan cost and repayment plan. If you do not receive your amortisation schedule, do make it a point to request it, as it is an invaluable asset that helps you understand the repayment structure.

 The amortization schedule details the following:

What is the relevance of the Amortization schedule?

With the Amortization schedule at hand, you can easily check the status of your loan.

Initially, the interest component of the EMI is larger than the principal amount; as the tenure progresses, the principal and interest components repaid are in equal measure; thereafter, the principal amount forms a major part of the EMI.

If you make a part payment towards the principal amount, the schedule will be adjusted; usually, the Bank will reduce the loan tenure rather than the EMI. You can, thereafter, ask the Bank for a new schedule with the reduced tenure.

The Amortization schedule of your loan is a ready reckoner for your loan’s financial status; having a copy on hand is essential. Checkout the sample illustration below for further understanding:

LOAN SCHEDULE
MONTH EMI INT. PRIN. PRIN. O/S
0 0.00 0.00 0.00 500000
1 44074.30 4375.00 39699.30 460300.70
2 44074.30 4027.63 40046.67 420254.03
3 44074.30 3677.22 40397.08 379856.95
4 44074.30 3323.75 40750.55 339106.40
5 44074.30 2967.18 41107.12 297999.28
6 44074.30 2607.49 41466.81 256532.47
7 44074.30 2244.66 41829.64 214702.83
8 44074.30 1878.65 42195.65 172507.17
9 44074.30 1509.44 42564.86 129942.31
10 44074.30 1137.00 42937.31 87005.00
11 44074.30 761.29 43313.01 43692.00
12 44074.30 382.30 43692.00 0.00

Key Points to note:

Foreclosing on the loan after the midpoint is not practical, as most of the interest has already been paid.

FAQ

 

Why are banks referring to CIBIL increasingly for processing a Personal Loan?

Personal loans are unsecured credit extended to customers for personal use and repaid within a fixed term. To keep the default ratio low, banks allocate funds to applicants who meet the eligibility criteria and have a history of meeting their financial obligations on time.

The CIBIL (Credit Bureau of India Limited) records and maintains credit transactions of individuals and issues them a score based on their Creditworthiness.  Banks and NBFIs check CIBIL before extending further credit. They refer to CIBIL to verify the following:

Further Loan amounts are issued to the applicant based on the existing dues and financial eligibility to pay the additional EMI.

Can I get a personal loan with a “Nil” or “0” score?

A 0 or -1 CIBIL score indicates that you have either not availed of credit or do not have sufficient credit history. You can apply for an HDFC Bank Personal Loan or an ICICI Bank Personal Loan. 

The HDFC Bank eligibility criteria for applicants with a 0 or -1 CIBIL include the following:

The eligibility criteria required for an ICICI Bank personal loan with a 0 or a -1 CIBIL score:

Why was my loan rejected despite a 750+ score?

A CIBIL score of 750+ is considered healthy and should make the applicant eligible for a personal loan. Below are instances when a personal loan can be rejected despite a good score. 

Customer is overleveraged: An applicant is considered overleveraged if:

 The CIBIL score may not be affected if dues are paid on time, but the request for additional funds may be denied.

The employer is not approved: The company a customer is employed with forms an essential part of personal loan eligibility. 

Verification is negative: Customer verification is an essential part of the KYC regulations for issuing credit. Lenders perform a Video KYC and, if required, a physical verification at the applicant’s residence or office to verify the authenticity of the information submitted. 

If verification is not completed, the Personal Loan request is denied, even if the applicant’s CIBIL score is above the required benchmark.

Incomplete Documents: A personal loan is a collateral-free loan; it is processed based on the customer’s profile and the documents submitted, such as proof of income and KYC documents. A good CIBIL score will ensure personal loan eligibility, but if the required documents are incomplete or unavailable, the personal loan request will not be processed further.

 

Do private banks offer personal loans to customers with low CIBIL scores?

Private Banks offer personal loans as short-term funding with reasonable interest rates. As personal loans are offered without collateral, keeping the default ratio low is a challenge for most private Banks. CIBIL history and records help identify customers with higher CIBIL scores and a smooth repayment history. Although banks require a CIBIL score of 720+, each case is assessed on its own merits.

Are NBFCs better than banks for low-CIBIL-score personal loans?


NBFCs (Non-Banking Finance Companies) are similar to Banks, as they are also licensed to provide secured and unsecured credit in the form of loans. Banks and NBFCs set their own eligibility criteria and lending terms. 

NBFCs that offer personal loans actively are:

NBFCs also require a CIBIL score above 700 and do not issue personal loans to applicants without a credit history. If you have a low CIBIL score, NBFCs do give some allowances, as compared to banks, based on the following:

Overleveraged Customer: If you are currently running 6 to 7 loans and your existing EMI exceeds the permitted income-to-EMI ratio, a Bank will decline your personal loan request as overleveraged. Whereas with NBFCs, you can transfer the principal balance of your existing personal loans to an NBFC. With a balance transfer, your EMI will decrease, reducing an excessive financial burden and increasing your eligibility for the required personal loan amount.

 CIBIL inquiries: Each time a customer applies for credit, the lender forwards an inquiry to CIBIL to check their existing CIBIL score, credit history, and credit lines. These inquiries will appear in your record, indicating the number of applications you have forwarded for a loan or credit card. Lenders view too many CIBIL inquiries as a warning that the customer is credit hungry, planning to apply for credit from multiple lenders simultaneously. Banks do not process a personal loan application if there are more than 3 credit inquiries on CIBIL in the past 3 months. Still, NBFCS accepts 6 to 8 inquiries, allowing the applicant to apply.

Application Score: is a value assigned to the customer’s details in the personal loan application form. NBFCS, such as SMFG Finance, use an Apps score before processing a personal loan application. If the customer details score above the required benchmark, the application proceeds; if it does not, it is declined. If the customer’s CIBIL score is low but the Apps score generated from other information is sufficient, the customer may still be eligible for a personal loan despite the low CIBIL score.

Need funds for wedding expenses? Or falling short of the amount required to complete furnishing your home? Personal loans are readily available from Banks and NBFCs for emergencies and personal needs. 

What is the difference between Banks and NBFCS?

Banks and NBFCs are both registered institutions licensed by the Reserve Bank of India to provide financial and lending services in the form of

There are key differences between the functioning and facilities of a Bank and an NBFC that influence the criteria for providing credit. 

Knowing the eligibility criteria and benefits of Banks and NBFCs are essential to choosing a suitable option for your personal loan requirements.

What are the benefits of a personal loan from Banks as compared to NBFCs?

Higher Personal Loan Amounts Issued by Banks v/s NBFCs

Lower Personal Loan Interest rates from Banks as compared to NBFCs.

Reduced Processing fees charged by Banks compared to NBFCs.

Banks require fewer documents than NBFCs to process a personal loan.

Advantages of applying to an NBFC for a personal loan, as compared to a Bank.

NBFCs issue personal loans to employees of all companies; Banks are restricted by policy.

If you have a lower CIBIL score and need a Personal Loan, apply to an NBFC.

Avail a lower interest rate by transferring your credit card dues to a personal loan from an NBFC.

Transfer the high-interest APP Loans to an NBFC Personal loan with a Balance Transfer.

Conclusion.

A personal loan from a Bank or an NBFC, the decision will depend on the following inputs:

Circumstances in which applying for a personal loan from a bank is a better option.

Situations when a Personal Loan from an NBFC is a good option.

Can I get a top up on my HDFC Bank Personal loan?

HDFC Bank, the leading personal loan provider, offers existing customers the option to access funds for individual use through a Top Up. A personal loan top-up is a convenient option for HDFC Bank personal loan customers. The existing personal loan gives the customer leverage with the Bank and helps speed up the process for additional funds. 

What are the HDFC Bank Top Up personal loan eligibility criteria?

To get a top-up on an existing personal loan, the applicant should fulfil the following eligibility criteria:

Income: The applicant should be earning a regular income of ₹ 30000/- and above, transferred electronically to the salary account every month.

Company Category: The applicant’s current employer must appear on HDFC Bank’s list of approved companies for personal loan sourcing.

CIBIL Score: The applicant’s CIBIL score must be above the required benchmark of 720 points, and the applicant must have no recent credit.

HDFC personal loan track: The EMI repayments for the existing HDFC personal loan should be made as per the schedule without delays or defaults.

Financial Eligibility: The applicant should be eligible for additional loan amounts as per the HDFC Bank multiplier and FOIR (Fixed obligations versus income) calculations.

Existing credit dues: The credit card dues and EMI for other loans must not exceed the eligibility criteria requirements.

Gap period: To Top Up an existing personal loan, the HDFC Bank requires a gap period of 3 months or more, particularly if you do not have a good credit score.

What are the benefits of the HDFC Bank personal loan top-up?

How many times can an applicant apply for an HDFC Bank personal loan Top Up?

When should I take a personal loan top-up?

When is a personal loan top up not a good option?

How will the status of my current personal loan change after a top-up?

After your request for a top up has been approved, your personal loan will change as follows:

 Can you get an HDFC Bank personal loan top up if you work for a non-listed company?

What are the factors that affect the interest rate for an HDFC personal loan top up?

The interest rate for your personal loan post a top up will depend on the following factors:

Conclusion:

A Top Up works well for applicants needing funds on an urgent basis, whereas if the HDFC Bank personal loan interest rate has increased or you have repaid the major part of your primary loan, an HDFC Bank parallel loan is a good option.

The availability of credit in the form of unsecured finance and mortgages from banks and NBFCs is changing the lifestyles of salaried individuals.

Individuals earning a high income no longer have to wait to own their own home or furnish it with the latest accessories; a home loan or a personal loan can easily provide the funding needed to repay it conveniently via monthly instalments. Credit cards enable instant payments for retail goods and fine dining. 

Lenders have, over the years, identified segments and behaviour patterns of individuals who use credit responsibly and repay dues on time. Primary factors include employment with organisations on the Bank’s approved company list and the individual’s previous credit usage. These factors will further influence eligibility for additional credit. 

You may have recently experienced a credit default. Will your company category help override this, or will a healthy credit history enable you to receive the funds you need? A detailed comparison of both these factors will help create a better understanding:

What is a company category list for loans?

To classify companies for lending purposes, banks have published their own approved lists of companies for loan and credit card sourcing. Companies on the list are stable, profitable, with high turnover and substantial assets. Banks issue their own company category list, such as:

What is a credit score?

A credit score is a three-digit number that indicates an individual’s creditworthiness. Credit bureaus operating in India include:

The Credit Bureau of India Ltd (CIBIL) score is used by most Banks to assess an individual’s credit usage. The score ranges from 300 points at the start to a maximum of 900 points. A score of 720 or above indicates a good repayment record and eligibility for credit.

What is the importance of the company category list?

Employment with an approved company signifies that the applicant has job stability and a regular income. 

What is the relevance of the credit history?

Your credit history is the record of the loans and credit cards allotted to you and the repayment details. Credit bureaus like CIBIL will assimilate and reflect the following in your credit history:

Based on your credit history, CIBIL will allot you a credit score. Most banks require a credit score of 720 or higher to qualify for a personal loan. Your credit score and history will determine your eligibility for an unsecured personal loan, a credit card, or a mortgage. 

If there are any delinquencies or delays in your CIBIL history, or your CIBIL score is 

How to check company category for loan?

Leading Banks such as HDFC Bank, ICICI Bank, and AXIS Bank will process a personal loan request if your company is included on the Bank’s approved company category list. 

Before applying, it is advisable to check whether your company is on the approved list of banks to avoid delays. Applicants can check the company category online on the Bank website before submitting documents, or forward your query to us at www.yourloanadvisors.com.

 

How to check your CIBIL score?

Apply for a personal loan after using the Personal loan eligibility calculator to check the amount you are eligible to get.

What are the advantages of a company category list?

The HDFC Bank company category list, the ICICI Bank company category list and the Axis Bank Approved List of Companies are exhaustive lists of companies approved to source unsecured loans and credit cards.

 You should check if your company is approved before applying for a personal loan. If your company appears on the approved list, the Bank has confidence that you have stable employment and can pay your dues on time. Loan applicants benefit as follows:

What are the benefits of the CIBIL score?

Your CIBIL score reflects your credit management and plays a crucial role in the processing of a loan request. CIBIL assigns scores from 300 to 900 based on your credit usage. When you apply for credit, the lender will first review your credit score and history. 

Can you get a loan without a credit history?

Cashless spending has become the norm; payments are made digitally or via credit or debit cards. Building a CIBIL score is now mandatory. With a bank-issued credit or debit card, purchases can be made on EMI, helping to develop a CIBIL score. 

It takes 12 months of regular credit usage for CIBIL to issue a credit score. If you are new to credit or do not have the required length of credit history, you are eligible for a personal loan from;

Which Bank will provide a loan to non-listed company applicants?

If you are employed with a company that does not feature in the personal loan company category list of any Bank, you have the following options:

In conclusion, your company profile and CIBIL score are the two primary variables lenders consider when issuing a personal loan. Although all salaried employees look forward to working with a listed company, changing employers may not be easy if a non-listed company employs you. 

Whereas regular credit usage and timely repayments are achievable. Make sure to build a strong credit profile so you meet the personal loan eligibility criteria for an instant personal loan.