Five Ways You Can Bag Personal Loan Despite Low CIBIL Score
Securing a loan with a low credit score can be challenging. Read on to know the 5 ways to get personal loan even with low CIBIL score!
Every product or service we buy requires money. Be it higher education, treating critical illness, home renovation, expansion of business and even buying a high-end consumer good, money is one of the most critical resources. But money may not always be readily available. In such times, loans are excellent sources of financial assistance.Of the different types of loans available through banks and non-banking finance companies, personal loans are among the most preferred. It is a kind of unsecured loan where there are no restrictions on its usage. These loans are easily accessible and do not require the borrower to pledge any asset as security. What matters to banks and online lenders is the income, credit score—or the CIBIL score—and repayment history of the borrower.
The credit score, also called the CIBIL score, is a three-digit number that reflects the creditworthiness of the borrower. It helps lenders to evaluate how likely the borrower is to repay the loan. The credit score is calculated by credit bureaus such as TransUnion CIBIL and Experian. A higher credit score increases the likelihood of getting a loan and with good terms.A credit score of 750 and above is considered ideal by lenders. Securing a loan with a low credit score can be challenging. But borrowers can still avail a personal loan through the following ways:
• Opt For A Smaller Amount:An individual with a low CIBIL point is looked upon as a high-risk candidate. Lenders may not be willing to do business with such people, especially if the loan amount requested is too high. A high loan amount applied with a low credit score means more risk for the bank.
Contrarily, lenders may be comfortable considering a loan of a smaller amount because the repayment of a lower loan amount is easier. As the borrower pays the EMIs on time, the credit score keeps improving.
• Tap A Co-Applicant or A Guarantor:Some banks and financial institutions allow co-application for personal loans. The borrower's spouse, parents or siblings can be a co-applicant. In co-application, the income of both the applicants is taken into consideration for the loan. The combined score of both the applicants not only helps to bag a bigger loan but also, helps in speedy loan approval. Similarly, applying for a personal loan with a guarantor increases the chances of getting a personal loan. This is because the guarantor is responsible for paying off the loan if the main borrower defaults.
• Show Supporting Evidence:Supporting documents showing additional income sources or a hike in salary can convince the lender to sanction a loan. The additional evidence must prove that the borrower’s income can support the EMI payments.
• Check For Errors In Credit Report:Technical errors in a credit report, though rare, are possible. Credit bureaus collect individual data and prepare a credit report using their proprietary algorithm. If any individual identifies an error, he or she should get the error corrected immediately.
Resolving issues related to incorrect outstanding amount, loan account status, date of payment, etc. takes time. The sooner the errors are resolved, the better.
Borrowers with a NH or NA on the credit report resulting from a credit inactivity in the last 36 months, should speak and explain to prospective lenders about the period of inactivity.
• Go For Secured Loans:When chances of personal loan approval seem dim, offering a collateral may help. Borrowers can pledge any tangible assets like property, jewellery, bond papers, etc. to the lender. Alternatively, depending on their needs they can opt for a car loan, equipment loan, etc. A loan with a collateral provides the lenders extra comfort since they can auction the asset in case of defaults.
ConclusionA CIBIL score of 550 or less may mean rejection of personal loan requests for many prospective borrowers. But it must be noted that lenders evaluate a loan approval based on several factors like bank balance and income as well.
Convincing a bank or financial institution for a personal loan with a low credit score may be difficult. Those who manage to secure personal loans with low credit score may have to pay higher interest rates on personal loans.IIFL Finance, one of the trusted names in the banking sector with a huge customer base, offers a personal loan with no end-usage restriction. The loan application process is simple and transparent. Also, IIFL Finance offers flexible repayment options for borrowers to choose as per their convenience.
Designed for borrowers who are in urgent need of cash, IIFL Finance offers AI-powered digital banking experience. The company checks for loan eligibility and approves an instant loan within a few minutes.