Since a personal loan has no restrictions on its intended use, it is a simple go-to choice for covering a variety of needs. However, because it is an unsecured loan, it is crucial to meet the requirements for loan approval. Even if your CIBIL score is low, there are ways for you to apply online for a personal loan and get it approved.
What is a CIBIL score?
Credit Information Bureau (India) Ltd. is known as CIBIL. It is a company that has been permitted by the Reserve Bank of India (RBI) to determine a person’s credit score. The creditworthiness of a person is thus indicated by their CIBIL score.
The four main components of a person’s CIBIL score are loan term, credit type, credit exposure, and payment history. A high CIBIL score is the result of timely loan repayments, less exposure to credit, and other similar variables. The CIBIL score can be lowered in instances of loan defaults.
Compared to a person with a low credit score, someone with a good credit score can easily get a loan sanctioned. A good CIBIL score lies between 300 and 900.
A CIBIL score of 750 or higher is regarded as excellent, whereas a score of 550 or lower makes it difficult for a person to get a loan approved. For these people, financial institutions may either sanction loans at higher interest rates or deny the loan.
6 Ways to Get a Low CIBIL Personal Loan
Here are the six best ways to manage a minimum CIBIL score for a personal loan.
- Get a guarantor
You can ask a friend or member of your family to serve as your guarantor. This gives a lender confidence that you can repay the loan, and in the event of a default, your guarantor can settle the dues. However, the guarantor must have a solid CIBIL score and a clean credit report.
- Go for a joint application
You may choose to apply for a loan jointly with a relative or acquaintance. However, it becomes crucial that the co-applicant has a strong credit history. As a result, lenders will be aware that at least one candidate is trustworthy and can entrust you with the requested loan amount. It is quite challenging to get clearance if the other person’s credit score is also low.
- Choose a low amount
If lenders see a low CIBIL score on your credit report, they can reject your loan application. You can choose a smaller loan amount in certain situations. A smaller loan amount typically entails a reduced risk of repayment. As a result, there is a likelihood that the lender will grant the loan.
- Request the lender
If you have an immediate need for money, you can request that your lender take it into account. For instance, if you need a loan to pay for medical treatment, show the lender your medical bill to demonstrate the urgency of your situation. Similarly, submit the outstanding debts if you need the funds to organise a wedding. This would greatly boost the likelihood that your low CIBIL personal loan would be granted.
- Check if there are any issues in your CIBIL record
Even if your CIBIL score is low, you still need to review your credit reports to figure out the primary causes of your poor credit report. Additionally, you must notify the authorities if you find any mistakes in your credit report. Simply log in to the official CIBIL portal and register the issue. Your CIBIL score will significantly rise after the error is corrected. A clean credit report could also improve your chances of getting the loan approved.
Here is how your credit score calculation is determined:
- Credit type and duration: 25%
- Credit exposure: 25%
- Payment history: 30%
- Other factors: 20%
- Prove loan payment reliability
You can prove your income and that you will be able to pay the monthly instalments on time by showing proof of statements. You can also inform the lender of any upcoming promotions in your career. This will convince the lender that you will be able to pay your EMIs on time even with a poor CIBIL score. As a result, they will be more likely to approve your low CIBIL personal loan request and have faith in your ability to repay the loan.
It is best to avoid applying for a loan from a bank if you have a low CIBIL score and a pressing need for credit because every low CIBIL personal loan application is reviewed in conjunction with a hard inquiry into your credit report.
Multiple hard inquiries can lower your credit score, and if your application is denied (a possibility that is likely with commercial banks), it might further lower your CIBIL score. Therefore, it is preferable to apply for a low CIBIL personal loan from an NBFC because of their propensity to have more accommodating policies for clients with bad credit. However, it’s vital to note that NBFC interest rates are higher than those provided by banks in this case.
You can use a simple online calculator to determine your eligibility for a low CIBIL personal loan. You must select whether you are a self-employed person or a paid employee by going to the proper website. To get the results you want, input the income value and the EMI.
When providing you with a low CIBIL personal loan, such as a credit line, one of the first factors that lenders take into account is your credit/CIBIL score. A high credit score indicates a high capacity for repayment.
In other words, your credit score reflects your ability to responsibly manage credit. Anything between 300 and 900 is considered a respectable CIBIL score, with anything over 750 being considered outstanding. The likelihood that your low CIBIL personal loan application will be accepted increases with your score.
There is still a potential that you could acquire a low CIBIL personal loan, even if your chances of getting one with no CIBIL score are drastically reduced if your credit score is low. If you want to know more about CIBIL scores and loan approvals, check out Piramal Finance.