A personal loan is an unsecured loan you can avail to address financial emergency situations like payment of medical expenses, travel costs, home renovation expenses, education fee and others. Such type of loan is approved on the basis of your creditworthiness that is measured by checking your credit score. Lenders in India check on credit score before approving your loan application because the score determines your credit eligibility and repayment behaviour. Read this article to understand how you can get a personal loan with a low CIBIL Score.
What is CIBIL Score?
CIBIL Score is a three-digit numeric score that determines your creditworthiness. The score ranges from 300-900 with 300 being the lowest and 900 the highest. The Credit Information Bureau of India, also known as CIBIL is an RBI authorized credit agency responsible for the calculation of the score.
The score is generated by CIBIL based on the financial information provided by banks and financial institutions on a monthly basis. The score is calculated based on your existing debts, repayment behaviour, credit utilization ratio, credit card outstanding and other factors.
This means that if you always make timely repayment towards your credit card and loan EMIs and have a low credit utilization ratio then you are likely to have a high credit score that would make you eligible to get a high personal loan amount at low-interest rates.
On the other hand, a low credit score can lead to loan rejection or approval of the same at a high-interest rate. Banks and financial institutions in India generally approve loan applications of applicants having a credit score of 650 and above.
Having a high CIBIL Score makes it easy for you to get any type of loans including personal loans, vehicle loans, home loan and other types of loans.
A personal loan is an unsecured loan taken to deal with various financial emergencies. This type of loan amount does not require you to keep any collateral and is provided based on your credit eligibility and credit score.
Factors that cause a low CIBIL Score
Below factors can have a huge impact on your CIBIL Score
- The high credit utilization ratio
- Having zero credit history
- Multiple loans
- Too many rejected loan requests or credit card requests
- Late payment of credit card dues and loan EMIs
- Having high outstanding on credit card
- Settling credit card debts by paying only the minimum due amount
Tips to get a personal loan with low CIBIL Score
A low CIBIL Score can lower your chance of getting a personal loan. However, you can follow the below tips to get the loan even with a low credit score.
Apply with a guarantor: If your friend or family member is ready to offer a guarantee to the bank towards your repayment of the personal loan amount, then you can apply with a guarantor. If the guarantor has a high CIBIL Score, then your loan application is likely to get approved. In case if you default on the loan payments, then the guarantor has to repay the loan on your behalf.
Apply with a co-applicant: If your spouse and family members have a good credit score then you can apply for a personal loan with them. Good credit of the co-applicant combined with his/her income can increase your chances of getting the loan.
Collateral: In case your personal loan application is rejected, then you can keep your assets like gold, insurance policies, fixed deposits, jewellery and others as collateral and get a loan against the same.
Check if your employer has any tie-ups: If you work with a reputed company there are high chances that your company would have tie-ups with various banks and financial institutions have special corporate loan programs.
Apply with a fintech company: Apart from applying for a personal loan with banks, you can apply with an NBFC or a fintech company offering instant loans. In comparison to banks, NBFCs are not stringent when it comes to paperwork, requirements and eligibility criteria when processing your loan application. Additionally, NBFCs and fintech companies are more accepting of individuals having a low credit score and salary. There are several fintech companies in India offering you quick access to credit to individuals with CIBIL Score as low as 650.
Getting a personal loan for low CIBIL score applicant has now become easy with the above tips. Before applying for an unsecured loan, it is important that you check your loan eligibility online using a personal loan eligibility calculator to get an estimate of the amount you are eligible to get. Remember, a low credit score can lead to rejection of the loan that can further dent your score and decrease your chances of getting a loan in the future.