What Should Be Your CIBIL Score Before You Apply For A Microloan Online?

Before applying for a microloan, checking your cibil score is a crucial step to get sme loan. Read to know more with IIFL Finance!

9 Dec,2022 11:23 IST 15 Views
What Should Be Your CIBIL Score Before You Apply For A Microloan Online?

India has witnessed a rise in entrepreneurs like never before. While the businesses are in their formative stages, they need initial funds to start and scale. In this situation, they can avail of microloans from banks or NBFCs. However, to avail of a microloan, one essential criterion is to have an excellent CIBIL score.

What Is A CIBIL Score?

The CIBIL score is an individual’s three-digit credit history summary. It is a CIR, also known as a credit report. The CIR is an individual's credit repayment history across credit types and institutions.

What Is A Microloan?

Microloans or SME loans are tailored to small businesses. SME loans are also available for individuals who want to start a small business but do not have the financial means to do so. They are profitable options for those seeking the highest rate of return and looking for funding urgently.

Small business lending standards vary from bank to bank, but there are some breeding standards that virtually all small business lending standards follow. IIFL is a well-known small business lender that has relatively flexible requirements. General SME loan eligibility and criteria are as follows:

• Established business for a minimum of 6 months
• Minimum turnover proof
• The business operations should be free of any restricted business category.
• Should not be an NGO

What Is The Role Of A CIBIL Score In A Microloan?

A CIBIL score is essential to disburse any type of loan. SME loan conditions and interest rates determine the CIBIL score necessary for microloans. Generally, a CIBIL score of 750 and above is the best chance for you to avail of the loan.

The lender will consider your CIBIL score and other factors, including your monthly income, capacity to repay monthly installments on schedule, and previous bank history. However, if the loan you require is insignificant compared to your yearly turnover and monthly income, a CIBIL score of 600 to 700 may be sufficient in some instances and banks.

CIBIL engagement in the microloan segment has recently increased dramatically. When presenting a borrower's trustworthy profile and repayment schedule, lending institutions benefit from CIBIL expertise and intelligence. The CIBIL score enables them to screen out correct and deserving consumers with an attractive interest rate and flexible SME loan criteria. It protects lenders against needless risk while also ensuring that borrowers with impeccable credit can readily obtain loans without collateral.

How Is A CIBIL Score Calculated?

CIBIL considers the following factors during your credit evaluation.

• Credit Repayment History:

Making timely repayment of your loan and installments is critical for a decent CIBIL score.

• Types Of Credit:

A borrower with a good credit mix with the same credit score is more likely to receive loan approval.

• Prevailing Debt and Credit Utilisation:

A credit utilisation of 30% or less is ideal.

• Frequency Of Debt:

You should keep an optimum debt frequency and fewer inquiries. An unsuccessful request can put you under scrutiny.

Considering the above factors, you should have a good credit mix, repay your loan/installments on time and keep your credit inquiries low.

Avail Of A Microloan With IIFL Finance

IIFL Finance provides loans across various segments in India. You can easily avail of a microloan with IIFL Finance with the best interest rates and the least hassle. You can also apply for a microloan online to avoid the inconvenience of visiting a branch.

The entire process is well-structured and customer friendly. Thus, you can avail of a loan within a few hours of your application.

Frequently Asked Questions

Q.1: How to maintain a good CIBIL score?
Ans: A few steps to maintain a good CIBIL score are -
• Make timely credit payments
• Keep a check on your CIBIL score
• Keep your credit report up-to-date

Q.2: What are the documents required for a microloan?
Ans: General document requirements include - KYC documents, PAN cards, bank statements, and other lender-specific documents.

Q.3: What should my CIBIL score be before applying for a microloan online?
Ans: A CIBIL score of 750 and above a safe to apply for a microloan online. In the case of a small amount, a score between 600-700 might also work, depending on the lender.

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