A poor CIBIL score can make it difficult to get approved for a personal loan. A low CIBIL score can make it challenging to get approved for a personal loan. However, there are still many options available for individuals with low credit scores. In this guide, we will discuss the options available to you along with the steps you can take to increase your chances of getting approved for a personal loan with bad CIBIL score.
What is CIBIL score?
CIBIL score, also known as credit score, is a three digit number that reflects the creditworthiness of an individual. It is based on the credit history of an individual and is used by financial institutions to assess the riskiness of lending to a borrower. A score of 750 or above is considered good, while a score below 600 is considered poor.
If your CIBIL score is low, then it may be a bit difficult for you to get a loan or you are likely to get a loan at a higher interest rate. The better your CIBIL i.e. credit score, the more likely you are to get a loan at a lower interest rate.
What to do to get a personal loan with a low CIBIL score?
Borrowing money can be easy for you as long as you are able to repay the loan amount. Delay or default in loan repayment affects the credit score which is also known as CIBIL score. This score is more important for a personal loan than any other type of loan.
CIBIL Score measures your credit worth. The CIBIL score usually ranges from 300 to 900. The closer the score is to 900, the better it is for you, while a score closer to 300 means you have a hard time getting a loan. Lenders generally prefer to lend money to people with a CIBIL score above 700.
Your CIBIL score is based on several factors related to your borrowing history. It is separate and independent from your income. Personal loans require a higher CIBIL score than any other type of loan.
A major component of your CIBIL score is how you have repaid your loans after taking the loan. Delays and defaults can lower your CIBIL rating. Here are some strategies to get a personal loan with a bad CIBIL score.
Step 1: Check Your CIBIL Score
The first step in getting approved for a personal loan with a bad CIBIL score is to check your score. You can check your score for free on the CIBIL website. Be sure to check your report for errors or inaccuracies, as these can negatively affect your score. If you find any errors, you can diagnose them with Sybil.
Step 2: Improve Your Credit Score
One of the best ways to increase your chances of getting approved for a personal loan with a bad CIBIL score is by improving your credit score. This can be done by paying your bills on time, reducing your credit card balance and limiting the number of credit payments you make.
Step 3: Find a Co-Applicant
Another option to increase your chances of getting approved for a personal loan with poor CIBIL score is to find a co-applicant. A co-applicant is someone who applies for a loan with you and shares the responsibility of repaying the loan. This can be a family member or friend with a good credit score.
Step 4: Consider a Secured Loan
A secured loan is a loan that is backed by collateral, such as a property or vehicle. Since the loan is secured, there is less risk of losing money to the lender, which can make it easier for individuals with poor CIBIL scores to get loan approval. However, it is important to note that if you are unable to repay the loan, the lender has the right to forfeit the collateral.
Step 5: Apply for Personal Loan with NBFC
Non-Banking Financial Companies (NBFCs) may be more liberal when it comes to lending to individuals with poor CIBIL scores. These companies also consider factors such as income and employment history, rather than relying solely on credit scores. However, it is important to know that the interest rate for taking a loan from an NBFC is higher than a conventional bank loan.
Step 6: Consider Gold Loan
Gold loan is a type of secured loan which is backed by gold. The lender will hold the gold as collateral and will release it after the loan is repaid. This type of loan can be a good option for individuals with a poor CIBIL score, as the interest rates are usually lower than those of unsecured personal loans.
Step 7: Promote Your Source of Income
Before giving you a personal loan, the lender must be convinced that you have the ability to repay the amount. The lender must be convinced that you have sufficient cash flow to cover additional loan repayments. When the lender is fully satisfied, he will be ready to give you the loan even if you have a poor CIBIL score.
Can I get a loan despite a bad CIBIL score?
Getting a loan with a poor CIBIL score can be difficult, as a low score indicates a high risk of default to the lender. However, getting a loan with a low CIBIL score is not impossible. Some lenders may also be willing to consider other factors, such as your income and employment history, before making a decision.
Additionally, some lenders may offer loans specifically designed for people with bad credit. These loans may have higher interest rates or stricter terms and conditions, but they can help you get the financing you need. It is also important to work on improving your CIBIL score for availing loans and maintaining a good credit history.