What is the minimum score required for personal loans

What is a Credit Score?

A credit score (also known as a CIBIL score in India) is a three-digit number ranging from 300 to 900 that reflects your creditworthiness.

• 900 → Highest score, excellent borrower profile
• 300 → Lowest score, high-risk borrower

This score is calculated based on multiple factors, such as:

• Repayment history (on-time EMI and credit card bill payments)
• Outstanding debt (how much you currently owe)
• Credit utilization ratio (how much credit you use vs. what’s available)
• Types of credit used (secured vs. unsecured loans)
• Credit age (how long you have been using credit)

The higher your score, the more trustworthy you appear to lenders.

Why Does Credit Score Matter for Personal Loans?

Personal loans are unsecured loans, meaning they do not require collateral. This makes them riskier for banks and NBFCs. To reduce this risk, lenders check your credit score before approving your loan.

Here’s why your credit score plays such a big role:

1. Approval Chances – A higher score improves the likelihood of loan approval.
2. Interest Rate – A good score helps you secure lower interest rates.
3. Loan Amount – Higher scores often qualify for larger loan amounts.
4. Loan Tenure – Borrowers with strong scores may get longer repayment terms.
5. Faster Processing – A good credit score leads to quicker approvals and disbursals.

👉 In simple terms: A high credit score = faster approvals + cheaper loans.

Personal Loan Credit Score Requirements in India

Different lenders may have slightly different cut-offs, but here’s a general breakdown of how credit scores affect your personal loan eligibility:

Excellent (800 and above)

• Best loan offers available
• Lowest interest rates
• Longest repayment tenures
• Higher loan amounts approved quickly

Very Good (740 – 799)

• Attractive interest rates
• Flexible tenure options
• High approval chances

Good (670 – 739)

• Decent interest rates
• Reasonable loan limits
• Stable repayment options

Fair (580 – 669)

• Limited approval chances
• Higher interest rates likely
• Smaller loan amounts and shorter tenure

Poor (Below 579)

• Difficult to get approval
• May require a co-signer or collateral
• Higher risk category for lenders

Minimum Credit Score Needed for a Personal Loan

Most lenders in India require a minimum score of 640–650 for smooth personal loan approval. However:

• Some banks/NBFCs may approve loans with scores as low as 580, but at higher interest rates.
• Borrowers with 500–600 scores might need to provide collateral or apply with a co-applicant to increase their chances.

How to Get a Personal Loan with a Low Credit Score

If your credit score isn’t very strong, don’t lose hope. There are ways to still secure a personal loan:

1. Apply with a Co-Signer – A guarantor with a good score can improve your approval chances.
2. Opt for Smaller Loan Amounts – Start with a manageable loan and repay it on time to build credibility.
3. Show Stable Income Proof – Lenders value consistent salary or business income.
4. Consider Secured Loans – If unsecured loans are tough to get, pledging collateral like fixed deposits or gold can help.
5. Improve Your Score Before Applying – Repay debts, clear credit card dues, and avoid multiple loan applications.

How to Improve Your Credit Score for Future Personal Loans

Building a healthy credit score doesn’t happen overnight. It requires consistent effort. Here are some actionable steps:

• Pay EMIs and credit card bills on time – Even one missed payment can lower your score.
• Maintain a low credit utilization ratio – Ideally below 30% of your total limit.
• Avoid too many loan applications at once – Multiple rejections can harm your score.
• Keep old credit cards active – Longer credit history strengthens your profile.
• Check your credit report regularly – Correct any errors that may affect your score.

Benefits of a High Credit Score for Personal Loan Borrowers

Having a good credit score doesn’t just increase your chances of approval—it comes with several added perks:

• Quick Approvals – No lengthy verification process.
• Lower Interest Rates – Save thousands over the loan tenure.
• Higher Loan Limits – Borrow more when needed.
• Flexible Repayment – Choose longer tenures with affordable EMIs.
• Special Pre-Approved Offers – Banks and NBFCs often send exclusive deals to high-score customers.

Example: How Credit Score Impacts Loan Cost

Let’s say you apply for a ₹5 lakh personal loan for 5 years.

• With a credit score of 780, you may get an interest rate of 10.5% p.a. → EMI = ₹10,747.
• With a credit score of 620, the rate might rise to 16% p.a. → EMI = ₹12,174.

That’s a difference of ₹85,000+ over the tenure—just because of your credit score!

Key Takeaways

• Personal loans are unsecured loans, making your credit score the deciding factor.
• A score of 640–650 is generally the minimum for approval.
• Higher scores = lower interest rates + better terms.
• Borrowers with poor credit can still apply using co-signers, collateral, or smaller loan amounts.
• Building and maintaining a good score ensures faster approvals and cheaper borrowing in the future.

At FinCrif, we help you connect with trusted banks and NBFCs to find the best personal loan offers tailored to your credit profile. Whether your score is excellent or needs improvement, our team guides you through the process to ensure quick approvals and smart borrowing decisions.

A strong credit score is more than just a number—it’s your passport to financial freedom and affordable borrowing. Start building it today and enjoy hassle-free personal loans tomorrow.