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About Personal Loans

Personal loans are unsecured loans borrowed from a bank, NBFC or an online lender for meeting various needs like marriage, vacation, home renovation etc. Term “Unsecured” means they don’t require collateral or security, and this means they carry a higher rate of interest than other secured loans like a car or home loan.

How Do Personal Loans work?

Personal loans are like any other loan. You just have to apply for the loan online, submit the requisite documents, the lending institution than checks your credit worthiness or credit history and then if your CIBIL score is good, Bank or NBFC makes an offer that indicates the amount you can avail and the personal loan interest rate you will be charged. If the offer is favorable to you and you accept the offer, the money gets transferred to your bank account, and you can use it as per your wish.

The personal loan repayment can be made through equated monthly installments that are calculated on the basis of the amount you wish to borrow, the interest rate and the tenure. If you apply for loan offline, then the process isn’t straight forward. It requires you to run around and go through a pile of paper work then you end up getting personal loan.

Did you know you can get Personal Loan with Low CIBIL score? Know Here

One of the most crucial factors that act as deciding factor for your Personal Loan Eligibility is your CIBIL score. Lenders check your CIBIL score before lending any kind of loan to its customers. To understand the role of CIBIL score, you need to understand the meaning of CIBIL and its relation to the personal loan.

Meaning of CIBIL Score and its relation to Personal loan

CIBIL (Credit Information Bureau India Limited) is an organization that calculates credit score which works as the first and foremost criterion to determine the personal loan eligibility. Credit score is basically a three-digit numeric summary of your complete credit history. Your credit score is dependent on the information provided by banks/NBFCs on a monthly basis whose credit value range from 300 to 900. CIBIL score less than 750 is considered as a low or bad CIBIL score. Banks and NBFCs generally restrain from providing personal loans to the people with a low CIBIL score, or even if they do provide personal loan, they charge a very high rate of interest for it.

Whenever you apply for any loan, be it car loan, home loan, personal loan or a business loan, CIBIL score is the first thing that is checked by Banks. Your CIBIL score is totally dependent on the repayments of your personal loans, vehicle loan, credit card debts or home loan. If you repay your loans on time then it will get reflected in your CIBIL score and it becomes a good CIBIL score. Whereas on the other side, nonpayment or late payments of dues can severely affect your CIBIL score as it poses negative impact on it.

Personal loans are mostly taken to manage financial emergencies. Lenders check applicant’s ability to repay loan on time. As personal loans require no collateral or security deposit so it becomes crucial for banks to check applicant’s past history in terms of credit repayment through CIBIL score.

What factors cause a low CIBIL Score?

It’s important for you to know the factors that cause low CIBIL score. Below mentioned factors can cause low CIBIL score:

  • Untimely or delay in loan EMIs payment or Credit card dues.
  • High utilization of credit limits
  • Multiple loans often result into a low CIBIL score
  • Unsecured loans in Higher percentage
  • Applicant’s zero credit history
  • Untimely payment of loan EMIs or Credit card dues.
  • Several rejected loans/credit card requests.
  • Credit card settlement with the bank by offering a lower amount than the dues.

How to get a personal loan with a low CIBIL score?

If you have low CIBIL score then your chances of getting personal loan with low CIBIL score becomes less. There are few other options that one can explore to avail a personal loan with low CIBIL score. Here are few options that will help a person with low CIBIL score to obtain personal loan:

  • Collateral loan: If your personal loan application gets rejected and personal loan does not get sanctioned, then you can try to get a secured loan. You can avail a secured loan even if you have a low CIBIL score by using collaterals such as fixed deposits, gold, and land etc.
  • Look for tie-ups between your lender and the employer: if you are employed in a reputed firm, then there are good chances that your company may have tie-ups with the renowned lenders as a part of corporate relations. When you have such tie-ups with banks, then a bank may offer special banking facilities that could be helpful in getting a loan.
  • You can avail joint loan with your family member or spouse. If anyone in your family have a good CIBIL score, you are good to go for availing any kind of loan. A joint loan will be easily sanctioned based on both of your CIBIL score.
  • A guarantor: In case you have a guarantor among your family or friends who hold a good CIBIL score then there are higher chances that you can easily avail personal loan based on CIBIL score of a guarantor.
  • Other Sources: You can also check with other sources apart from public or private sector banks. Non-banking finance companies (NBFCs) also offer loans but they charge higher rate of interest than that of public and private sector banks.

Note: You need to have a good CIBIL score in order to get any kind of loan. If you are considering availing a personal loan, then above mentioned alternate options can help you avail personal loan even with your low CIBIL score.

6 Effective Tips to boost your Personal Loan eligibility

Have you ever applied for personal loans and found your personal loan application rejected? If yes, then we will make you learn the meaning of personal loan, the steps involved in loan application process that will offer better chances of approval.

Have a quick look below to find why your loan wasn’t approved and what all is needed to improve your odds of loan approval.

As we all know Personal loans are unsecured loans that don’t require you to pledge any security against them. You can avail personal loans from different financial institutions. If you have monthly income of minimum 30,000 per month, then you become eligible for personal loans. Today, personal loans are accessible online from third party lending institutions apart from banks and NBFCs. Personal loan Eligibility calculator will tell you how much amount you can get as personal loan. It also tells the tenure, EMI, and interest rate at which you will get the personal loan. Let’s quickly find out top 6 effective tips to improve your personal loan eligibility.


1. Paying off existing loans

One of the foremost things you should consider when applying for a loan is that you should not have any existing loans running. It simply indicates that if you are paying EMIs of other loans then your loan repayment capacity gets risky for lender. Lenders generally avoid disbursing loans to borrowers who are already having existing loans.

2. Keep an impressive Credit Score

From all set standards and criteria, credit score is the vital factors that lenders focus on. If your credit score has been good from long period of time, then the lending institution will consider you as credible borrower and not a risky one.

3. Consider Long Tenure

Choosing a long tenure increases an eligibility of an applicant. A long tenure indicates borrower’s longer capacity to repay the loan for quite a good duration in future. However, you have option of using personal loan EMI calculator for planning your EMIs.

4. Timely payment of your credit card bills.

Your loan repayment punctuality reflects your honesty and transparency of paying credit card bills on time.

5. Rental Income Residential or Commercial

If you own any residential or commercial property, then the rent you earn from it is considered as your rental income. It adds to your credit worthiness as it improves your existing financial condition.

6. Good Variable Pay

If you have variable pay along with your fixed income, then it is suggested that you must keep record of the same. The more your variable income is, the better are your chances to become eligible for the loan. You can apply for personal loan by comparing interest rates of various public and private sector banks.


What documents you will need for loan application?

Different lenders ask for different personal loan documents that you need to submit along with your personal loan application. There is no standardized list of documents that you need to have while availing for loan. Typically, most financial institutions like Banks and NBFCs ask for below mentioned documents:

  • Your Permanent Account Number (PAN)
  • You need to submit the copy of your address proof, such as Aadhar card, ration card, passport, and electricity bill
  • Three or six months’ salary slips
  • Six months’ bank statement of your salary account
  • E-NACH mandate form

Based on your personal loan application, your lender may ask for additional documents for further verification.

5 Ways to Fix your Personal Loan Eligibility

While personal loans are the easiest available form of debt, getting it approved could sometimes be a challenge. There are so many players in the market that the competition for lenders is pretty stiff. Every lender has their set of criteria for lending money. There are variable factors that the lender will look at when they are considering your personal loan application. Let us look at the ways you can fix your loan eligibility.

Monitor Personal loan application rejection reason

You must need to find out reason behind rejection of your personal loan application. Below are the different reasons for rejection of your personal loan application. Some of them are listed below:

Monthly income

Your monthly income comes first while checking your personal loan eligibility. Higher the income, greater will be your borrowing capacity. The lending institution needs to be assured that a borrower has capacity to repay loan. High income attracts high interest rate and you can negotiate the loan tenure as well. Low income increases the chances of loan application rejection. Even if you get personal loan on low income, then chances are high that the lender will provide you loan at higher interest rate and offer low amount. Personal loan EMIs constitute 45% to 60% of the monthly income. No amount more than this will be disbursed for loan.

Credit Scores

Applicant’s credit history and credit score plays a vital role in deterring or favoring your personal loan application. If you have a healthy credit history then it will lead to generating good credit score. Your credit score is generated depending on the information mentioned in your credit report. Credit score is statistically derived three digit numbers that ranges between 300 and 900. Your credit score determines your creditworthiness. Depending on this credit score, the lending institution determines whether to clear your personal loan or not. If your credit score is more than 750 then this ensures speedier approvals for your loans. Loan interest rates are decided upon looking at your credit score. If you have high credit score, then lender may provide you loan at low interest rates. Poor or low credit score could mean loan rejection.

Inappropriate or false information

Loan applicant’s loan application is thoroughly scrutinized before loan approval. Banks or lending institutions verify every minute detail in your loan application. If any discrepancy is found in the information provided by the applicant, then it will likely to raise suspicion and could lead to loan rejection immediately. That’s why it is crucial that you fill details carefully and correctly. Submitting wrong information could bare you from obtaining any other loans as well.

Instability in Job or rotational job

Personal loan are majorly granted on the basis of your monthly income. One of the most significant criteria for obtaining personal loans is the stability of your job. It states that an applicant must be working in current organization for more than 6 months. Therefore, you must make sure that you should be working with single organization from long. Frequent job changes may reflect bad image of applicant and doesn’t go well with your lender. Lending institutions look for income stability and don’t look for fixed monthly income. If you are a person with frequent job changes, then lenders may not be keen on lending money to you.

Existing loans or debts if any

If a person has too many pending loans, then it will reflect badly on your credit history. Too many existing loans could be one of the reasons for loan rejection. You can avoid this negative aspect by paying off your existing loans or debts and then applying for a fresh loan. That’s how you can avoid loan rejection.

Too many loan enquiries

You may not know about this aspect, but it is true that every time you apply for a loan, the lending institution enquires about your credit score with CIBIL. Each and every enquiry is noticed and mentioned in your credit report. A lot of loan applications would mean so many inquiries. This reflects that you are financially unstable and always depend on different forms of credit for fulfilling your financial needs. Lenders often reject your personal loan application and do not take this positively.

Focus on your credit score

Your credit score determines your credit worthiness. On the basis of your credit score, the lender decides whether to clear your loan. If your credit score is above 750, then you are highly likely to get loan approval. Applicant’s credit score helps the lender to decide rate of interest for your loan. If you have a good credit score, then you are more credit worthy and banks may offer a personal loan at a lower rate of interest.

Therefore, it is extremely vital to establish credit history for yourself. You can constantly keep an eye on CIBIL website and ensure to check your credit score to avoid error in your credit information report. It could affect your credit score. On time loan payments or clearing your dues will help maintain a healthy credit score. If you want to pay low EMIs, then you can select loans with longer tenures. If your loan tenure is less, then your EMI will be considerably higher. Smaller EMIs denote affordability. This would simply mean low chances of defaulting on payments.

Maintain the Right Debt-to-Income Ratio (DTI)

Debt to income ratio determines the number of debts with regards to your income. A high DTI would indicate that you have so many debts running and you may not be able to repay your loans. Therefore, it is important for you to maintain right amount of Debt to Income ratio. Lending institutions prefer DTI of less than 40%. Keep your DTI ratio low so that you can repay the existing loan before taking a fresh one. This will not only show your discipline of making on time payments, but lenders will be pleased to offer fresh personal loans to you at competitive rates.

Research, Compare, and then Borrow

You must know that each time you enquire for a loan, your loan enquiry is recorded in your credit report and it poses negative impact on your credit score. Therefore, it is suggested that you must conduct your research and compare loan products online offered by various lenders. As already mentioned above various times that every lending institution has its own lending criteria. Personal loan rate of interest vary from one bank to another. You must select the bank or NBFC that fits your requirements and provide you the personal loan quickly and conveniently.

Prepare and organize your documents before applying

It is suggested that you must organize your documents well in advance before applying for personal loan. Make sure to double check your loan application form. You must also know your credit score before applying. Never mention any wrong or misleading information to comply with lender’s terms and condition in order to apply for a loan. It is best to get a co-applicant with strong financial stability. If your application is rejected, don’t immediately rush to apply for loan again.


If your personal loan gets rejected for any reason, you need not get disheartened It is suggested that you must take steps to building your good credit report and follow aforementioned steps to brighten your chances of personal loan approval. Once you ensure you meet the above mentioned checklist, you are ready to apply for personal loan.

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