Planning your finances for a huge expenditure on the horizon? A wedding, a business to be set up or just a long overdue holiday? Or has an unexpected emergency expense come up that your savings can’t cover?
A personal loan from HDFC Bank may be exactly what you need. You can borrow up to Rs.25 lakhs for any expenditure - usually approved within 72 hours. This is, of course, based on your eligibility and ability to repay your loan.
Say you’re a 30 year old salaried-employee with five years of work experience, living in a rented place in a metro, you automatically meet HDFC’s personal loan criteria for a loan up to Rs. 5 lakhs with attractive interest rates and EMI options. But this is just your loan eligibility. Whether your loan gets approved on not depends largely on your CIBIL score.
What is CIBIL?
CIBIL is the Credit Information Bureau of India Ltd and is India’s first credit information company. The ‘Credit Bureau’ as it is also known collects, analyses and maintains the credit history of individuals (and legal entities), making it available to banks and other financial institutions upon request. One reason for this is to be able to rank individuals (and legal entities) on a standard scale so that banks and lending institutions can be assured that a borrower can repay his loan, based on his history.Why is the CIBIL score so important? What does it contain and what scores are considered favourable?
When you take out a loan, the lending entity undertakes the risk that you might not repay your loan or honour your loan payments. The CIBIL score can stand as a vote of confidence in your ability to repay, or can be a witness to your bad credit history. In the case of unsecured HDFC personal loans, this CBIL score/rating is all that HDFC Bank has to look at to take a call on your final eligibility.
Your credit history is the sum total of all the details of your dealings with banks and financial institutions in terms of your capacity to repay outstanding balances of borrowed amounts. It takes into account factors like:
- Total outstanding amount. It is advisable to keep this minimal.
- Ratio of secured loans (home or automobile loans) to unsecured loans (personal loans and credit cards). The more unsecured loans you have, the lower your credit score will be.
- Repayment schedule – whether you’ve repaid on time, before time, after due date, or have defaulted on the payments entirely.
- How many times you’ve applied for credit in the last year or two – it needs to be minimal to avoid seeming credit-hungry.
These factors, among others, are taken from banks and compiled, collated, analysed, evaluated and a pattern is dawn about your ability to repay outstanding balances. This pattern is represented as your CIBIL TransUnion Credit Score. The different scores that one can have are:
- N/H – meaning you have No History of past credit.
- N/A – meaning your score is Not Applicable, if you have not had any credit activity in the last few years.
- 300 to 900 – your credit history effects this score and the closer you are to 900, the more likely it is that your HDFC personal loan will be approved. Good scores start at around 700.
HDFC Bank Personal Loan information
- Personal Loans can be approved up to Rs. 25,00,000.
- Flexible EMI and repayment options from 12 to 48 months.
- HDFC Bank personal loans require no security, collateral or guarantor.
- Loans generally approved within 72 hours of applying.
- Free Personal Accident Cover.
- Credit shield.
- Customizable loans for corporate employees and working women professionals.
- Interest rates that are among the best in the market.
What are HDFC Bank’s requirements for CIBIL TransUnion Score?
Most banks in India require you to have a CIBIL TransUnion Score of above 700 to be eligible for personal loans. Since these loans are unsecured, your CIBIL score is a big factor in getting your loan approved. HDFC and other banks are approving loans for those with a scores of 700-750, or higher, with 700 being the absolute lowest limit. You should ideally aim for a score >750.
Apart from the numerical CIBIL TransUnion Score, are there any other reasons my loan may get rejected?
CIBIL Credit Reports have sections for comments against your borrowing history. Bank representatives sometimes give you the option to reach a “settlement” with the bank if you are unable to repay the full amount. This means that your loan has not been “repaid in full” and is considered a negative remark. Even a score above 750 but with negative comments like “settlement”, “defaulter”, etc. that imply that you did not repay the full amount on the terms on which you borrowed it are factors that go a long way in getting your loan approved/rejected.Your loan could also be rejected if:
- You are overleveraged – meaning your DTI (debt-to-income) ratio is unfavourable. If you already spend a lot of your income on clearing existing debt, you will be deemed overleveraged and unable to assign more of your income towards repaying your new loan.
- You have inadequate Tax-paying history – Banks usually need for you to have been filing income tax for at least two years prior to your loan request, to view your application favourably.
- You are credit hungry - This is the term used to describe borrowers who have borrowed too much in the last year itself. Banks have a tendency to reject these loan applications.
- You’re matched with someone on the defaulter list – banks maintain defaulter lists containing the names, addresses and other details of defaulters. If you move into a house that was formerly occupied by a defaulter, the banks internal defaulter list will match your loan application with a red-flagged address, making an investigation necessary.
- You guaranteed a defaulted loan – The person who is equally responsible to repay a loan as the borrower, is the guarantor. If there is any default on a guaranteed loan, or it has been “settled” or paid off late, it will count as a negative rating for you.
How do I improve my credit rating and CIBIL score?
To successfully take out a HDFC Bank personal loan, we recommend that you maintain a respectable CIBIL TransUnion credit score by:
- Using Credit Cards regularly – proving that you are responsible and capable of handling short term credit. Simply using the card won’t improve your rating, but paying off your outstanding balance on or before the due date definitely will.
- Making outstanding payments on time – defaulting on EMI payments or loan instalments payments can get you a bad rating. Paying off what you owe before you owe and, in the case of partial payments, try to pay at least 50%-75% of the outstanding.
- Staying within your credit limit – overly utilizing your credit limit indicates that your income is not sufficient to manage all your expenses and that you have no control over spending.
- Applying for new credit in moderation – take only as much as you need. Take into consideration different offers and rates from different institutions before making a decision.
Performing simple tasks like planning payments on time, having securities in case you are unable to pay, maintaining good relations with banks, staying away from guaranteeing loan-defaulters, etc. goes a long way in making sure you have the financial freedom and power you need, when you need it.
|As explained above, is your CIBIL score good? Now, apply for the HDFC Bank Personal Loan|