Are you applying for a personal loan? The first thing a lender checks is your credit score when you approach them for a personal loan. Your credit score is the amount of credit availed by you; your credit history, repayment abilities, etc. Credit score will help lenders determine if you would be a risky proposition or not as personal loans are collateral-free or unsecured loans. When you have a bad CIBIL score, you may have heard that you cannot get a personal loan. This is not true, actually. In this post, we have discussed some ways on how to get Personal Loan for Low CIBIL Score.
When you need funds in a pinch, a personal loan can be of tremendous help. You will have to go through various checks before such a loan is sanctioned. To get an estimate of the personal loan amount you are eligible for, you can use the personal loan eligibility checker.
What is a CIBIL Score?
Through your CIBIL (Credit Information Bureau Limited) score, banks and other financial institutions can know your creditworthiness. How responsible you are with your loans and credit cards can be determined by this. It is nothing other than a number associated with you. For loan approval, the CIBIL score is one of the prime parameters. Recognized by all the banks as an authority on an individual’s credit rating, the CIBIL score was India’s first-ever credit rating system.
How does CIBIL Score work?
In many countries, there are credit score systems that are similar to the CIBIL score system. Between 300 and 900, you are assigned a score depending upon your credit history. Your repayments of Personal Loans, home loans, vehicle loans, and credit cards determine the banks’ number forwarded to CIBIL. You may get a good CIBIL score if all your payments are made on time.
When you forget to pay on time or skip a payment, it could lower your credit rating. Over time, it affects your credit rating and makes it difficult for you to get approved for a loan. Your utility bill payments like phone, electricity or water bills also included in CIBIL and could improve or deteriorate depending on when you pay.
A detailed guide on how to get Personal Loan for Low CIBIL Score.
Even though it is a challenge, you can still get a personal loan with a poor credit rating by taking the measures listed below.
- To support loan repayments, show evidence of income
No matter if you have a low credit rating, you can make the lender more favorable to your loan application with a hike in salary or possibly having an additional income source. Moreover, your loan’s likelihood of getting approved increases if you can show evidence that you have a secure job with a steady income flow. In this case, the rate of interest may be subjected to higher.
- Apply low personal loan amount
With a low CIBIL score, if you ask for a high personal loan amount, your lender may perceive you as a high-risk candidate. Your probability of defaulting on the loan repayment is higher from the lender’s point of view.
The lender may be more inclined to grant the loan request if the personal loan amount is lower. Also, it is easy to pay a lower amount.
- Apply for a joint loan or get a guarantor
Look for a co-applicant or guarantor with a good credit rating If you have a low CIBIL score. It can help you get a personal loan faster. It ensures that the necessary signatures on the relevant forms the KYC formalities are completed with permission from your co-applicant or guarantor.
It definitely helps towards getting a better deal when the lender sees a co-applicant or guarantor with a good CIBIL score on your loan application.
- Resolve errors in your credit report
If you apply for a personal loan on a low CIBIL score, it may be a hard time. Check your credit report; there may be misreporting or errors. In most cases, your record hasn’t been updated with the latest information, so it happens.
These types of mistakes are really unwanted and not your fault. So to avoid such issues, it is advised to check your CIBIL score regularly. If such an error happens any time, you need to resolve them immediately, reporting them to the relevant authorities. This will ultimately raise your credit score and make you a trustworthy candidate for a personal loan.
- Ask your lender to consider your case with NA or NH in your credit report
The credit period is not active in the past 36 months, or the absence of a credit period over the same period of time is marked by NA or NH on your credit report. This translates into you do not have a credit score at all in your CIBIL report. Talk to your prospective lender and get to know about the period of credit inactivity.
These are the basic steps you need to follow when looking to get Personal Loan for Low CIBIL Score.
