Does Having A Low CIBIL Score Make It Difficult To Get A Personal loan?

One of the foremost concerns of a lender is whether the borrower can repay the loan on time or not. A defaulting borrower means a loss for the lender. Checking the borrower’s credit history becomes essential in the lending process. A low CIBIL or credit score, especially while availing of an unsecured loan, can make the entire approval process challenging.

This article explains whether you can get a personal loan with a low CIBIL score.

What Is A CIBIL Score?

The three-digit score that reflects your credit history is the CIBIL score. It ranges between 300 to 900. The higher the CIBIL score, the better your chances of obtaining a favourable loan.

What Is A Personal Loan?

A personal loan is an unsecured loan that a borrower can avail to fulfil their immediate financial obligations. You can use the loan amount to fund unexpected expenses like a medical emergency, vehicle or domestic repairs, and more. There are no restrictions on the usage of the amount.

How To Avail Of A Personal Loan With A Low CIBIL Score?

Getting a personal loan with a low CIBIL score is challenging, yet not impossible. A few ways to avail of a personal loan with a poor credit score include

1. Support Your Income Sources

The lender is primarily concerned about your repayment capabilities. If you can show them a salary hike soon or additional income from other sources that will allow you to repay the loan on time and completely, it can enhance your approval chances.

2. Apply For A Low Ticket Size

With a low CIBIL score, lenders see you as a high-risk candidate. A poor CIBIL score makes you more liable to default than a borrower with a high score. In such a scenario, asking for a big amount for a personal loan may not work in your favour.

Your chances of getting loan approval with a lower amount are higher. Thus, applying for a lower amount can increase your chances of loan approval.

3. Get A Guarantor Or Apply For A Joint Loan

A joint applicant with a good credit score can give you an edge, as the co-applicants CIBIL score can compensate for your poor CIBIL score. If you apply with a co-applicant or guarantor, they are responsible for repaying the loan in case of default. It offsets the lender's risk and reduces hesitation in approving loan applications.

Please note: This is only beneficial if the co-applicant or guarantor has a good CIBIL score and meets other eligibility requirements.

4. Update Your Credit Report

Check for any misreporting in your credit report affecting your credit score. Such a situation may arise if the credit institution does not update your record with the latest information on your credit history.

Frequently Asked Questions

Q.1: How can I improve my CIBIL score?
Ans: A few ways to improve and maintain your CIBIL score are:
• Timely repayment
• A healthy credit mix
• Limit credit utilisation
• Keep the application frequency low

Q.2: What are the other fees involved in a personal loan?
Ans: A processing fee of 2-3% of your loan amount is chargeable. Additionally, lenders may levy foreclosure charges if you repay the loan before the tenure.