How Does The CIBIL Score Affect Your Personal Loan Interest Rates?

Personal loan is a loan that can be availed to fulfill individual personal need. Read to know how can cibil score affect your personal loan interest rate.

27 Sep,2022 10:44 IST 22 Views
How Does The CIBIL Score Affect Your Personal Loan Interest Rates?

Personal loans from banks and NBFCs are ideal for individuals without adequate capital to cover their personal expenses. Through a personal loan, individuals can ensure that they raise enough money to cover expenditures such as marriage, education, home, renovation, vacation, etc.

Since personal loans do not come with end-use restrictions. However, lenders require borrowers to have a good CIBIL score while applying for a personal loan, as it is one of the main factors that affect personal loan interest rates.

What Is A CIBIL Score?

A CIBIL score is a three-digit score out of 900 that reflects the creditworthiness of a person to the lender. An individual with a score closer to 900 is deemed more capable of repaying a loan than those with a lower credit score in India. TransUnion CIBIL Limited generates the CIBIL score. It manages the credit files of over 600 million individuals and 32 million businesses, assesses your credit history, and provides a score out of 900.

How Does The CIBIL Score Affect Your Personal Loan Interest Rates?

Lenders such as banks and NBFCs take on a high risk when they offer personal loans to individuals as they may default on repaying the loan amount within the loan tenure. If that happens, lenders incur losses equalling the defaulted outstanding loan amount, with no way to recover the losses in the absence of collateral. Hence, lenders press highly that the borrower must have a high CIBIL score before they approve the loan to mitigate the chances of default.

The CIBIL score is indirectly related to the personal loan interest rates, i.e., a personal loan will have a lower interest rate if the borrower has a high CIBIL score. Suppose the borrower has a low CIBIL score. In that case, lenders will offer the personal loan at a higher interest rate as the borrower wants to square off the high risk they are taking by offering the personal loan even when the borrower's repayment capability is low. Hence, you must maintain a CIBIL score above 750 out of 900 to get personal loans with low-interest rates.


The interest rates on personal loans depend on the CIBIL score of the borrower, as lenders prefer to offer personal loans to borrowers with a score higher than 750. However, if you have a low CIBIL score, it is more than likely that the lender will offer a personal loan with a high-interest rate. Hence, it is necessary to maintain a CIBIL score, preferably above 750.


Q.1: What is the minimum CIBIL score needed to take a personal loan?
Ans: A CIBIL score above 750 out of 900 is perfect for getting a loan from a reputed lender.

Q.2: How to get a personal loan with an average CIBIL score?
Ans: The first step you can take is to start improving your CIBIL score. If you need immediate capital, you can find a guarantor, provide collateral to the lenders or take a personal loan with a high interest rate.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

Most Read

Franking and Stamping: What’s the difference?
14 Aug,2017 03:45 IST
Like 3485 3485 Likes
Difference Between 24 Karat and 22 Karat Gold
8 Dec,2022 09:26 IST
Like 740 740 Likes
Personal Loan With Low CIBIL Score
21 Jun,2022 09:38 IST
Like 1174 1174 Likes
Why Gold Is Cheaper In Kerala?
14 Jan,2023 09:35 IST
Like 537 1802 Likes

Get in Touch