How To Get Personal Loan For Business With Low CIBIL Score?
Lenders give loan based on their risk perception of a borrower to repay the loan. Read to know how to get personal loan for business with low Cibil score!
A personal loan from a bank or non-banking finance company to meet any business expenses, without depleting the savings or dipping into the emergency funds, can be a good option to arrange quick cash. But what if one does not meet the necessary eligibility criteria essential for loan approval?There are many factors like credit score, work experience, age, income, etc. that determine the approval of a loan. Of these, the credit score is a foremost factor considered by every lender.
What Is CIBIL Score?The CIBIL score, or credit score, is a number derived from the borrower’s credit history such as the number of open loan accounts, total debt, and repayment history. The credit score is a three-digit number that ranges from 300 to 900. A score of 750 or more is considered good for a loan.
There are four major credit bureaus in India that compute credit scores. These are TransUnion CIBIL, Experian, CRIF Highmark and Equifax.
What If The Credit Score Is Low?For individuals with a bad credit score of 550 and less, getting a loan approved can be challenging. But it is not impossible. There are many banks that consider other factors for individuals with a lower credit score while sanctioning a loan. Even if approved, these loans may come with hefty interest rates and stricter repayment terms.
Here are a few ways of getting a personal loan approved with low CIBIL score:
Apply For A Joint Loan:Applying a personal loan with co-applicants helps because for these loans the credit score of all the applicants is considered. The co-applicants are also responsible for the repayment of the personal loan.
Bring A Guarantor:If the banks are not fully convinced of the borrowing capacity of the individual, they look for guarantors with a good credit score. In case of a default, the lender can collect the outstanding money from the guarantor.
Apply For A Lower Amount:Seeking a higher loan amount with low credit score means more risk for the lenders. However, some lenders may be inclined to consider and approve a loan if the loan amount is less.
Provide Income Proofs:Showing evidences of a high income or a stable source of regular cash flow increases the chances of a loan getting approved.
Rectify Errors In Credit Report:Sometimes a loan application of an individual may get rejected because of erroneous reporting of numbers in the credit report. It may be because of some technical glitch or a missed update. It is necessary to check the credit report regularly and immediately raise a dispute in case of any error.
Ask The Lender To Consider A NA or NH Credit Report:NA and NH mean not applicable and no history, respectively, in the credit report. This implies an inactive credit period for 36 months or more. For these special cases borrowers should try to explain to the lenders about their period of inactivity.
ConclusionIf an entrepreneur can’t get a business loan to meet business-related expenses, a personal loan can help them come out of the sticky situation. The task becomes a little difficult when the borrower’s credit score is low. Still, there are several ways a business owner can get a personal loan to cover business expenses.
The entrepreneurs could bring in co-applicants or guarantors, and borrow a lower amount. They could also try to convince the lender of their repayment ability. In addition, they should check their credit report thoroughly for any errors that might be creating roadblocks in their loan application.