Every lender will evaluate your credit history before sanctioning a personal loan or a credit to you. Though a good CIBIL score will make personal loan approval easier and hassle-free, it is possible for people with low CIBIL score to avail a personal loan. Here are the steps to do so.
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A personal loan can be of great help when you need some finance on the go. Know that before your loan is sanctioned, you will have to go through various checks and evaluations set up by the lender. There are many personal-loan eligibility checkers where you can check the amount of loan, you are eligible for. Your application for a personal loan will have to go through a rigorous checking of your CIBIL score. A low CIBIL score reflects that you are not worthy of the credit. So, is a personal loan not available to people with low CIBIL scores at all?
You may succeed in getting a personal loan with a not-so-good CIBIL score but only by putting in some effort. Know your CIBIL score before applying for any type of credit or loan. Before we jump to the steps for availing of a personal loan with a low CIBIL score, let’s get to why it is good to know your CIBIL score and its impact.
CIBIL score- Its impact on loan eligibility
Your creditworthiness is directly represented through your CIBIL score. Reserve Bank of India has authorized The Credit Information Bureau (India) Ltd., popularly known as CIBIL to keep a record of the credit history of an individual. It is thus, responsible for calculating every individual’s CIBIL score. The range of CIBIL score varies between 300-900, where a score of 900 is treated as exceptional. That said, the more your CIBIL score, the more are your chances of easy personal loan approval.
A major portion of your CIBIL score depends on your repayment history. To ensure a high CIBIL score, do timely payments of your EMIs, loans, and credit card debts. Any CIBIL defaulter is most likely to face a rejection for their personal loan application. Hence, it cannot be emphasized more that you need to know your CIBIL score before applying for any credit.
An individual with a 750 or above CIBIL score is considered to be an ideal candidate for credit or loan. If your CIBIL score is lower than 550, you are considered a high-risk borrower and you might get rejected or offered high rates of interest. Your capacity of loan repayment is determined majorly through CIBIL score but your bank balance and employment are also considered.
Measures to avail personal loan on a low CIBIL score
Though it is a challenge, you can get a personal loan at a low CIBIL score by adhering to these measures:
Present some income evidence to back your loan repayments
A raise in your salary or an extra source of income can make a lender decide in your favour even with a bad CIBIL score. Adding more to it, if you can show the lender that you have a stable source of income that keeps the income consistent, the chances of your loan approval increases. Note that, you might be offered a personal loan but with higher rates of interest.
Try to apply for a personal loan of a low amount
If you ask for a high amount of personal loan with a low CIBIL score, it gives an impression of you being a high-risk borrower. According to the lender’s perception, you are more likely to default on a loan repayment than an individual with a high CIBIL score. Thus, if your request is for a low amount, it might get approved easily. And, repaying a low amount is always easier.
Get a guarantor or go for a joint loan
If you have a co-applicant with a good CIBIL rating or a guarantor, it will facilitate the approval of your personal loan application. Get your co-applicant or guarantor to do the necessary KYC formalities and make them sign on relevant forms with their permission. When a lender notices that you have a guarantor or co-applicant in your loan application, with a good CIBIL score, it affects your approval positively.
Get all the errors in the report resolved immediately
It is hard to get a personal loan approved with a low CIBIL score. However, it is a possibility that your credit report might have some errors or misreadings that are responsible for your bad CIBIL score. Mostly, this happens when your record has not been updated with the present-day information. This is not your fault, errors like this can bring up unnecessary issues. To avoid these issues, know your CIBIL score. If your report has any errors, report them to the concerned authorities or dispute them on CIBIL, to get them resolved. In the end, it will make your CIBIL score high by raising your creditworthiness.
Ask your lender to consider your application with NA or NH in the report
If you have an inactive credit history of 36 months or the absence of any credit transaction in that period, it is mentioned as NA or NH in your CIBIL score report. This implies that you do not have a CIBIL score in your report at all. Tell about the reason behind your credit inactivity to the lender and you might get a personal loan but with a high rate of interest.
Key Takeaways
Your best shot to get a personal loan approved with a low CIBIL score is to try with the NBFCs. They have better flexibility in loan approval criteria as compared to the banks. In case you have been a loan defaulter in the past, explain the reason for the same to the lender. If the reason is legit for instance, a medical emergency, lenders can consider approving your application for a personal loan.
With these measures, you can get a personal loan on a low CIBIL score but remember that adequate funds are required for timely repayments. Remember to know your CIBIL score after every few months. Alternatively, if you are facing rejection for a personal loan, you can try getting it against a property.
