Diwali is considered an auspicious time for buying consumer durables. Many people invest in automobiles, home repairs, and other consumer durables during the holiday season. During Diwali, several banks and financial institutions offer personal loans at low interest rates. These offers are for a limited time to entice retail consumers.
With Diwali around the corner, you might be worried about spending too much money. This is where personal loans come in. A personal loan is a simple and convenient way to obtain funds. It can be requested online with minimal paperwork. Once granted, the funds are instantly credited to your account.
Let us look at how you can apply for a personal loan and get the best interest rate of personal loan. You will also learn the factors that affect your personal loan CIBIL score.
Why Should You Get the Best Interest Rate on a Personal Loan on Diwali?
Here are some reasons why you should apply for a personal loan this festive season:
- Flexible end use: Unlike other loans, personal loans provide flexibility in spending. You can use your personal loan for the following purposes:
- Karvachauth- To organize special dinners for your spouse or buy a gift.
- Dhanteras- To buy gold or silver jewelry, silver utensils, electronics, cars, etc.
- Bhai Dhooj- To give your siblings money or expensive gifts.
- Diwali- To renovate your house, purchase consumer durables, buy gifts for family and friends, beautify your home, buy pooja-related products, buy new clothes, and so on.
- High loan amount: Personal loans typically range between Rs. 25,000 and Rs. 40 lakhs. As a result, a personal loan might be used to pay for a variety of needs.
- Collateral-free: Since a personal loan is an unsecured loan, you don’t have to worry about pledging collateral with the bank during Diwali.
- Repayment flexibility: Personal loan payback terms usually range from 12 to 60 months. They are determined on the basis of your ability to repay.
- Easy to apply: As banks are going digital, you can apply for a personal loan online. You don’t need to visit the bank for documentation since you can upload it online. Once approved, the loan amount is transferred directly to your account.
- An attractive interest rate: Many loans have interest rates starting at 10.25%. However, the interest rate of personal loans offered by banks or financial institutions is determined by various factors. These factors include your personal loan CIBIL score, age, income, and so on.
How High Should Your Personal Loan CIBIL Score Be?
The range of a CIBIL score is 300–900. For the best deals on loans and credit cards, you should aim for a personal loan CIBIL score that is close to 900. A CIBIL score of 750 or more is often regarded as optimal by most lenders. To qualify for a personal loan, you must have a CIBIL score of 750 or higher. Around 80% of loans are granted if the score is greater than 750, according to CIBIL data.
If your personal loan CIBIL score is below 550, the majority of lenders will deny your application. A poor CIBIL score indicates that your financial situation is unstable. It also means that you will have trouble repaying the loan. Very few lenders offer personal loans to borrowers with poor personal loan CIBIL score. Moreover, if your loan gets approved, the interest rate of personal loans will be quite high.
Before applying for a loan, it’s crucial to review its terms and conditions. You should also compare the fees and interest rates of personal loans across different banks and institutions.
Factors Affecting Your Personal Loan CIBIL Score:
Here are the factors that impact your personal loan CIBIL score:
Paying credit card balances on time.
- timely repayment of loan EMIs
- paying the total outstanding balance, not just the minimum amount owed
Reasons behind a low personal loan CIBIL score
- late or non-repayment of loan EMIs and credit card bills
- using credit cards to the maximum or frequently going beyond 75% of available credit
- Only paying the minimum on credit cards means that the rest of the balance is still owed
- having an excessive number of credit lines, particularly unsecured ones
How Can You Improve Your Personal Loan CIBIL Score?
Below are five things that can raise your personal loan CIBIL score:
A Healthy Bank Account
A healthy bank account demonstrates your ability to pay back a loan. This increases the likelihood of the approval of your personal loan.
Stable Income Source
A consistent source of income demonstrates your ability to repay the loan on time. Even if you have a poor personal loan CIBIL score, having a stable income helps you get one faster.
If you have a low personal loan CIBIL score, having a guarantor boosts your chances of getting a personal loan. The guarantor should, however, have a decent credit score or rating.
Reduction in Loan Amount
Despite a low personal loan CIBIL score, you might still be eligible for a loan. However, the loan amount will be lower, and interest rates may be high.
You can increase your personal loan CIBIL score by paying off your debts on time. Doing so would definitely help with your loan approval.
If you are planning to take a personal loan, the holiday season is the best time to get one. You can enjoy the most affordable interest rate of personal loans. However, keep in mind the importance of maintaining a high personal loan CIBIL score.
Piramal Finance is an excellent financing solution for customers looking for low-interest personal loans. Visit its website to learn more about other loan offerings and services.