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Looking to secure a Personal Loan? Well, having a rock-solid CIBIL score can turn the journey into a breeze, serving as your golden ticket to eligibility and proving you're a repayment champ! Yup, lenders are all about that CIBIL score when they're sizing up your application for a Personal Loan. But hey, if your CIBIL score is on the lower side and you still need that Personal Loan, don't worry! This guide is here to shake things up a bit and make the process more enjoyable. Let's dive in and explore your options!
Understanding the Impact of a Low CIBIL Score on Personal Loan Approval
Your CIBIL score is like your credit report, showing off how well you've juggled debt in the past. It's scored from 300 to 900 and takes into account your repayment track record, balances owed, credit mix, history length, and any recent credit action. A low score may lead to a loan denial, while hitting the 700s or higher turns you into the lender's dream borrower, boosting your chances of loan approval. When your score's low, lenders might be a bit hesitant to roll out the loan carpet but fear not, we'll jazz up your credit journey and turn it into a party!
Use These 10 Tips If You Need a Personal Loan with low CIBIL Score
1. Show Evidence of Sufficient Income For Loan Repayment
A hike in salary or an additional source of income may make the loan provider more confident about your loan application. Show evidence of a secure job and steady cash flow to improve your likelihood of easy loan approval.
2. Apply for a Smaller Loan Amount
Lenders may perceive you as a high-risk borrower if you demand a high loan amount with a low credit score. From the loan provider’s perspective, you have a higher probability of loan default in such a situation. Consider applying for a smaller loan amount to reduce the lender’s risk, making it easier for them to grant the loan. The repayment for a lower loan amount will also be easier on your pockets.
3. Get a Guarantor
If you are looking for a Personal Loan with a low CIBIL Score, getting a guarantor can speed up the approval procedure. A guarantor assures the lender that, in the event of default, the guarantor will assume responsibility for the loan. Getting a guarantor with a good CIBIL score will improve your loan eligibility and make it easier to obtain a personal loan.
4. Resolve Mistakes in Your Credit Report
In case your CIBIL score is low despite maintaining a good repayment history, you should check your credit report thoroughly. Your credit report may still have errors that are not your fault. It usually happens when your credit company does not report your latest credit-related information to the credit bureau. Errors like these can keep your credit score low and make it challenging to get a loan. Ensuring a timely check on your credit score and keeping your credit report error-free is important. Platforms like OneScore allow a free online check of your CIBIL score to help you identify errors and resolve them in time.
5. Add a Co-Applicant
Alternatively, you can add a co-applicant to your loan application while applying for a Personal Loan with a low CIBIL Score. A co-applicant is someone who co-applies for a loan and agrees to repay the loan with the primary borrower. Since the credit score of the co-applicant directly impacts your loan eligibility, you must ensure they have a high credit score.
6. Request Your Case with an NA
Credit bureaus mark a period of no credit activity for the last 36 months as ‘Not Active’ or NA in the credit report. It happens when the credit bureau does not receive any information about your credit-related activity for the past few months. With no recent credit history, credit companies cannot determine your financial position or how efficiently you handle credit. In such a case, they can consider your case with an NA and offer you a Personal Loan with a low CIBIL score.
7. Ask Your Lender to Consider Your Credit with an NH
Lenders may consider your case with an NH if you have no history of credit. It often happens when you are new to the world of credit and have never taken a loan or credit card in the past. Since the lenders have no record of your repayment history, they can take a risk in your case, though at a higher interest rate.
8. Borrow From Your Existing Credit Company
If you have an existing relationship with a particular credit company, consider reaching out to them first. The company will have all your credit account details, repayment history, cash flow, and prepayments. If you have a strong history of consistent repayments but have recently reduced your credit score for various reasons, they may still approve your loan based on your past records.
9. Apply for a Loan from an NBFC
Traditional banks have strict eligibility conditions that make borrowing difficult for borrowers, let alone those with a low credit score. On the other hand, NBFCs are Non-Banking Financial Companies that want to increase their profits by lending to a maximum number of borrowers. Thus, they keep their eligibility requirements as simple as possible to attract more borrowers. NBFCs are easier to convince, as they have flexible loan terms for more efficient credit management.
10. Improve Your Credit Score
While you may get a Personal Loan with a low CIBIL score using the above methods, try improving your eligibility by using strategies to increase your credit score.
1. Pay off existing loans. Consider consolidating your debt if you have multiple high-interest credit card debts or loans.
2. Diversify your credit profile. Maintain a mix of credit cards and loans. Keep your old accounts active.
3. Reduce your debt-to-income ratio. Keep your credit utilization rate low.
Once you achieve a score of 700 or above, it becomes easier to get a personal loan with lower interest rates and better terms and conditions.
How to Save Your CIBIL Score from Going Down
Want a low CIBIL personal loan? Follow these tips to ensure a good credit score:
Check your credit score frequently to get alerts whenever it drops
Review your credit report regularly to identify any errors and get them rectified
Make your payments on time and in full to maintain a good repayment history
Request an increase in your credit limit to reduce your credit utilization rate
Minimize credit card usage to avoid displaying credit-hungry behavior
Personal Loans can be of great help when you find yourself in need of instant funds. Before sanctioning your loan application, lenders check your credit score to determine your credibility. That is why checking your CIBIL score before applying is crucial to ensuring loan eligibility. OneScore is a reliable platform that allows you to check your CIBIL score for free online, based on which you can make your borrowing decision. You will also get free insights on how to improve your credit score and increase your loan eligibility with better terms and conditions.
Edited by: Ananya Gupta