Credit Score and Loan Approvals

Understand How Your Credit Score Facilitates The Loan Approval Process

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A dream house. A new car. An international education. A wedding in the family. Precious moments need to be cherished, without the worry of financial constraints. A loan helps take away that tension, but more often, the most harrowing experience is the loan application process itself. Not anymore. With your CIBIL Score and Credit Information Report (CIR), you can now plan your loan requirement in a more organized manner. The introduction of CIBIL Market-Place has simplified the loan application process even more. Instead of visiting multiple banks for a loan and awaiting confirmation of your eligibility, simply visit CIBIL Market-Place to compare the different deals offered on different loan types by different participating financial institutions based on your credit eligibility, and choose the one that fulfills your loan requirement the best. Click Here to understand how your CIBILScore facilitates the loan application process. Select the product below to read the FAQs on the respective loan category.

Personal Loan Whether buying a new home theatre or taking your family out on an exotic vacation, personal loans can be used for virtually any expense. It's perfect for those small expenses and can be repaid within a couple of years.

What is a Personal Loan?

A Personal Loan is taken by a borrower for his/her individual wants and needs; it is commonly referred to as an unsecured loan because there is no security/collateral against it. It is also called “All-purpose loan” at times as there is no restriction on the end use of the funds.

Borrowers use personal loans for various reasons such as vacations, refurnishing their homes, buying a new appliance, to fund weddings etc. All personal expenses the borrower wants to make can be made by availing a personal loan.

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Why go for a Personal Loan?

A Personal Loan is generally taken by borrowers who are looking for quick loans with minimum documentation. In addition, since there is no monitoring of the end use, it gives flexibility to the borrower to use the loan for any purpose they like.

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How much loan can you get?

Personal Loans can range from INR - 10,000 – 30,00,000/- based on the lender and the borrower’s ability to pay back. Go through this educational video to understand the loan approval process and to understand what your borrowing capacity is.

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What is the duration that it can be taken for?

Personal Loan is a short term loan. The repayment options are usually flexible, and it can be between 12-60 months, depending on the lender and the credit history of the borrower.

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What are the interest rates that I am eligible for?

Interest rates for a personal loan vary from borrower to borrower & lender to lender, depending on their individual credit history and amount borrowed. You can log on to CIBIL MarketPlace to check the interest rate (and other features) being offered to you by participating Banks basis your CIBIL Score and other parameters.

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What are the factors that affect interest rate for Personal Loan?

The lending rate depends on:

  • The amount of loan as compared to your income
  • Loan tenure that you opt for
  • Credit profile which is ascertained from your Credit Report

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What are the other fees and charges payable and when?

There are usually 2 types of charges that are levied- 1. When applying for a personal loan. These typically vary from 2-3% of the Loan amount. This varies from lender to lender. 2- When you prepay your loan i.e., if you pay-up the loan before the loan tenure then, there is a prepayment charge varying from 2-3%.

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What do lenders look for before sanctioning a Loan?

Your annual income, current EMIs, credit history of a borrower & your profile in terms of the company you work, are taken in to consideration when you apply for a loan. Since it is an unsecured loan, lenders specifically look at the repayment history and the credit score of a borrower. It is advisable to conduct regular checks of your CIBIL Score and CIR to make sure there are no errors and the overall report looks favorable to the lender.

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How long will it take for a loan to be sanctioned?

The time taken to disburse personal loans varies from lender to lender. Your loans may be approved in as little as 24 hours or may take up to 7 business days, based on your credentials.

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What should I look out for?

While applying for a Personal Loan, make sure you borrow within your means or else the repayment will become a long and tedious process which could affect your credit history and credit score if you have outstanding payments. Personal loans are one of the most expensive forms of loan available in the market. Choose carefully after conducting due research and understanding of the cost & the benefits involved.

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Credit Card Enjoy financial freedom with some of the the best credit card plans tailored by leading Financial Institutions to suit your credit requirement. Don't forget to visit CIBIL MarketPlace to see what the banks are offering you basis your credit eligibility.

What is a Credit Card?

A Credit Card is an instrument issued by a financial institution which allows the user to make purchases on credit, up to a predefined credit limit. A Credit limit is the maximum amount that can be spent or borrowed using the credit card. The limit varies for different borrowers and lenders as it is determined based on the borrower’s income, source of income, credit score, repayment history, and other personal details.

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What are the different types of Credit Card?

Depending on the Credit Institution, there are various types of credit cards, such as Signature, Platinum, Gold or Silver. There are also other category cards which appeal to a particular segment. Cards such as Miles card for frequent flyers or a movie card for movie enthusiasts. The type of card that is offered is based on the consumer’s borrowing power (based on his income & credit history) and each card type provides different offers, schemes and reward points.

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How to apply?

It’s a good practice to first check if your CIBIL Score and CIR is in order because lenders often view this as one of the first primary checks for approval of a credit card. Ensure you have a high credit score, and your repayment history does not have default payments because that may negatively affect your chances of getting approved. You can then approach any Bank and apply for a credit card basis your requirement.

 

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Why should I get a Credit Card?

Having a credit card enables you to make purchases beyond your budget while allowing you to pay back a full/part of the amount on a monthly basis. It is a facility that lets you borrow money on short notice and repay it back in installments (if required). A credit card also offers other perks in the form of rewards schemes and benefits; Miles are awarded if you spend a specific amount on airlines, reward points are awarded for spending a certain amount every month on shopping, etc (This varies from card to card and lending institution). These offers change from time to time but the accumulated points can later be redeemed for various other items depending on the credit card issuer's policy.

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What are the charges that can be levied on a Credit Card for late payment?

If you do not pay the “Minimum Amount Due” by the due date, then late payment fees are levied along with the interest charge on your outstanding amount. This late payment fees ranges from Rs. 250-1000, depending on the financial institute and type of card. Also, non-payment by the due date negatively impacts your Credit Score, which in turn may affect your future borrowing and bargaining capacity.

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How is the interest rate calculated on Credit Card outstanding?

If you pay only the minimum due or do not pay at all by the due date, then the interest rate as applicable will be levied on your outstanding. Most Credit Card issuers follow the average daily balance method. Assuming the payment is not made within the grace period or the interest-free period (often between 45-60days). This interest rate can be as high as 36% p.a. Let’s look at the below example -

Date Transaction details Amount
10 September Purchased Gadget 15000
15 September Purchased Jewellery 5000
18 September Payment Due date  
15 October Payment mode 2000
16 October Fuel purchase 1000
17 October Payment made 15000

*Since the individual paid post the due date, the entire outstanding balance will attract interest rate and a late payment penalty.

The charges calculated are as below -

Interest on 15000 @ 2.65%pm from 18 September to 15 October (i.e. for 28 days) ((15000 x 2.65 x 12 x 28)/365)/100 = 365.91

Interest on 13000 @ 2.65%pm from 15 October to 17 October (i.e. for 3 days) ((13000 x 2.65 x 12 x 3)/365)/100= 33.97

Interest on 5000 @ 2.65%pm from 18 September to 17 October (i.e. for 30 days) ((5000 x 2.65 x 12 x 30)/365)/100 = 130.68

Interest on 3000 @ 2.65%pm from 17 October to 18 October (i.e. for 2 days) ((3000 x 2.65 x 12 x 2)/365)/100 = 5.22

Interest on 1000 (fresh spends @ 2.65%pm from 16 October to 18 October (i.e. for 3 days) ((1000 x 2.65 x 12 x 3)/365)/100 = 2.61

Thus total interest = (365.91 + 33.97 + 130.68 +5.22 + 2.61) = 538.39

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What do the lenders look for?

With credit card applications, lenders look at personal details and credit behavior closely. The higher the credit score and cleaner the credit report, the better the chances are for getting a credit card.

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What should I look out for?

With a credit card, always make payments on time because the late payment fees is very high, around 15% of minimum payment due or 2.5% of the total outstanding balance. Another thing to watch out for is the closing of the credit card account; ensure the bank closes the account or else the charges will keep rising and it may be viewed as outstanding payment, which will affect your CIR and CIBIL Score.

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Auto Loan From impulsive road trips to your daily commute, your ideal automobile can now be in your immediate possession with Auto Loans.

What is an Auto Loan?

An Auto Loan is taken by borrowers who want to buy a vehicle. These loans are usually secured (collateralized) against the vehicle itself.

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What are the different types?

An Auto Loan can be offered for new cars, used cars, two wheelers (generally called a Two-wheeler Loan) and commercial vehicles (generally called a Commercial Vehicle Loan).

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What does the borrowing/repayment look like?

An Auto Loan can be availed for up to 90% of the invoice value. The vehicle is hypothecated to the lender, as collateral. The repayment is based on your income and other requirements; it is typically between 12-84 months.

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What are the typical interest rates?

Lenders fix interest rates depending on the type of vehicle and loan amount. Interest rates are usually fixed for auto loans.

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What do lenders look for?

Lenders check the income, credit history and current loan repayments (also called EMIs- Equated Monthly Installments) of the consumer before granting an auto loan. The better the CIBIL Score and repayment history, the higher the chances of being approved an auto loan of your choice. Ensure your credit report is up to date and favorable by purchasing your report here.

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What to look out for?

It is not always necessary to go with the bank your car dealer suggests, you can go to another lender if they offer better terms on the loan being offered.

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Home Loan Saving up for your dream home? Eyeing a property for your retirement getaway? Home Loans can make this dream a reality. Read the FAQs below before going in for a Home Loan.

What is a Home Loan?

Home Loan is offered to individuals who wish to purchase or construct a house. The property is mortgaged to the lender as a security till the repayment of the loan. The bank or financial institution will hold the title or deed to the property till the loan has been paid back with the interest due for it.

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What are the different types?

Through a Home Loan, one can purchase or construct a new house/ apartment; a Home Improvement loan is offered to those who wish to renovate their houses; a Home Extension loan is for consumers planning to add extra space to their house such as a new room or a new wing; a Loan Against Property is offered for a individuals seeking loan against an already existing property; a Land Purchase Loan is provided to consumers buying land as an investment, maybe to build a house later on and a Balance transfer loan is basically a home loan to pay off an existing home loan as this enables you to avail a loan with a lower interest rate.

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What is the maximum amount that can be borrowed?

The amount that can be financed typically depends on the status of the borrower (resident/non-resident), type of home loan (renovation, property purchase, property extension) and the financial institute. It is generally offered for up to 80-85% of the cost of the property.

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What is the typical repayment duration?

The repayment tenure takes into consideration the repayment ability of the borrower based on their income and existing EMIs. The typical duration for which a home loan can be taken is anywhere between 5-30 years.

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What are the types of interest rates?

The interest rates for Home Loans can be fixed or floating, or partly fixed and or partly floating, suiting the needs of the borrower.

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What other costs will I incur while applying for a Home Loan?

For a Home Loan, the basic registration charges, transfer charges and stamp duty costs are added to the cost of the home. Some other charges include:

  • Processing charge or booking fee – paid to the lender when you apply for the loan. It could be fixed or a percentage of the loan amount
  • Pre-payment penalty – if the loan is repaid before the agreed duration, some lenders may charge a penalty, up to 2% of the amount pre-paid.
  • Miscellaneous costs – there could be a documentation or legal fee, also known as “application fee”

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How do I know if I am eligible for a loan?

Refer this link, to better understand how loan eligibility is determined by a financial institute.

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What are the tax benefits on Home Loan?

There are certain tax benefits available on your Home Loan. Please check with your accountant to know of these benefits.

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What do lenders look for?

Lenders look for personal details such as a good credit history, annual and monthly income, existing EMIs of the consumer, a clean title to the house/ property and the location of the house before approving a home loan application. Buy our credit report here to ensure your credit history and personal details are in order so as to avoid rejection from the lender.

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General Questions

What is an EMI?

An EMI, equated monthly installment, is the amount of money to be paid to the bank or lender on a monthly basis. It consists of the principal amount and the interest on said amount, equally divided by the number of months in the loan tenure. The EMI is paid on a fixed date of the month until the full amount has been repaid. Calculating your EMI in advance can help you plan your budget, because you will know exactly how much money to pay each month.

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What are the different types of interest rate available?

    1. Fixed interest rate:
      A fixed interest rate on a loan or mortgage stays at the predetermined rate for the entire term of the loan. This allows borrowers to plan their future payments. Usually personal loans and credit cards have fixed interest rates.
    2. Floating interest rate:
      A floating interest rate fluctuates with the market or along with an index. Floating rates are usually offered for home loans; the prime lending rate or the base rate is used as a basis for calculating the floating rate and the interest rate charged is the prime interest rate/base rate plus a certain spread (as charged by the credit institution).

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Document Checklist

DOCUMENTS REQUIREDPERSONAL LOANCREDIT CARDAUTO LOANHOME LOAN
Latest Credit Score & CIR*        
Bank Statement        
KYC docs (identity, signature & address proof)        
Registration Papers        
Income Statement (such as salary slip)        
Property Papers        
Last 3 years IT return  
(for self-employed only)
 
(for self-employed only)
   

* This is an indicative list and may differ from lender to lender.