Personal Loans for CIBIL Defaulters

A CIBIL score or a credit score is a three-digit number produced by credit bureaus. It is a representation of your creditworthiness. The score usually starts at 300, goes up to 900 and keeps on altering based on the repayments and credit usage.

The credit score can take a hit if you default on the loan repayments, which in turn affects the eligibility of loans for CIBIL defaulters. Financial institutions and banks make it difficult to avail personal loans for CIBIL defaulters. However, some banks or online lenders can still provide loans to defaulters.

This blog has been curated with the tips and tricks through which a personal loan defaulter can apply for a loan despite having a low CIBIL score. Also, check out how one can improve their CIBIL score mentioned later in the blog.

Why is CIBIL Score Important?

It is vital to know that financial institutions and banks become more vigilant while scrutinising your loan application. They have a look at your credit score prior to concluding whether you are a reliable borrower or not. You will only be considered suitable for a financial loan if you are deemed responsible.

11 Ways to Get a Personal Loan for CIBIL Defaulters

Even though banks are the safest for availing a loan, your options are narrowed down if you are a CIBIL defaulter. You are, thus, left with the following options to avail a personal loan.

1. Apply for a Secured Loan

Applying for a secured loan with CIBIL default is the most preferable option. It is also called a loan against collateral. You can request a loan against security if you own fixed deposits or assets with any financial institution. In most cases, your CIBIL score is not considered. However, you need to be mindful that if you default on your payments, the lender is in a position to seize the collateral guaranteed by you.

2. Guarantor Backed Loan

Despite having a poor credit score, if you apply for a loan with a co-guarantor, it will be approved by the bank, provided that you are financially stable. A guarantor offers assurance to your lender, thereby mitigating the risk associated with your loan repayment. Your previous defaults would not hinder your loan application because, in this case, your guarantor will make the payment if you do not. The only prerequisite is that the guarantor must have an excellent CIBIL score. Bear in mind that if you are unable to repay the loan, the guarantor’s credit score will also be impacted negatively.

3. Online Lenders

With a bad CIBIL score, you can always approach an online lender since banks or financial institutions might reject your loan application. Online lenders are more likely to provide you with loans because they are more lenient towards CIBIL defaulters. Keep in mind that your application can also be rejected if they consider you a high-risk defaulter. This is because online lenders majorly provide unsecured loans.

4. Withdraw Provident Fund

The Provident Fund or PF was originally created to ensure that you are not faced with a lack of finances in your retirement. But, if you are facing a cash crunch, consider choosing this option. Currently, you can only withdraw a part of your fund under certain special circumstances.

5. Salary Advance

If you are unable to make yourself financially secure, you can also ask your employer for an advance payment of the salary. Make sure that you provide valid reasons to your employer for the same. It is crucial that you repay the loan you have defaulted on before applying for another loan. Try to remove your name from the defaulter’s list by improving your credit history. This will largely enhance your credit score.

6. Proof of Income

An urgent loan for CIBIL defaulters can also be availed by furnishing the current income documents. At present, the minimum salary requirement to avail of a loan is ₹25,000. So, if you prove that your income is adequate to pay the loan EMIs, you would be granted a loan with ease. It is necessary to exhibit an excellent Fixed Obligations to Income Ratio or FOIR. Your FOIR displays that the income earned is sufficient to meet all the financial responsibilities. Your lender will, therefore, be assured of your repayment capability.

7. Opt for a Loan with High-Interest Rates

Another way of getting a personal loan for CIBIL defaulters is by availing a loan at a high-interest rate. Yes, it might increase the financial burden, but it gravely improves the chances of your application being approved.

8. Spouse CIBIL Score

If your credit score is poor, your spouse’s CIBIL score can benefit you. Their assistance as a joint loan holder can help in getting your loan application approved. This can be advantageous to get personal loans for CIBIL defaulters.

9. Peer-to-Peer Lending

Peer-to-peer lending or borrowing is a crowdfunding practice used to raise an online loan for CIBIL defaulters. The loans are given to them by the people who want to invest. It is a direct transaction between the borrower and the lender where the bank has no role as a middleman. In this case, the lender thoroughly examines the borrower’s financial prospects, conditions, and assets so that the loan is not entirely unsecured.

10. Employer’s Relationship with the Bank

This is a good option to get a personal loan for CIBIL defaulters. The people who work with MNCs/reputed corporations or other public organisations have a higher certainty of income than others. In such a case, the lender is in a position to accept the personal loan application. The decision is made keeping in mind the loan repayment capability, employer’s reputation, and job stability.

11. Lower Loan Amount

A lower amount of personal loans for CIBIL defaulters is the most appropriate option. This is because a lower amount is easier to pay back, and the lender can trust you on paying back the amount.

Improve your CIBIL Score

If you are a CIBIL defaulter, the immediate thing you need to do is enhance your credit score. For that, you need to clear all the existing debts. The easiest way to remove your name from the list of defaulters is to make timely payments, and the chances of your loan approval will increase manifolds.

Tips to Improve Your Credit Score

• Ensure that you review your report at least four times a year to know the impact untimely payments might have on your credit score. It is essential to look for errors too. This would help you maintain a decent financial habit.
• Ensure that you always use a lower amount of credit (based on your financial requirements). It can improve your credit score as lower credit results in lower EMI, leading to an increase in the credit score.
• It is of utmost importance to pay the monthly EMIs on time. Late payments should be avoided at all costs.
• Try to pay off your dues in full, as the remaining balance can affect your credit score.

Frequently Asked Questions (FAQs)