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Whenever you request a personal loan, the lending company considers several variables, including your credit score. They do so to assess your eligibility.
Typically, lenders prefer to approve or grant loan applications from borrowers with excellent credit ratings. Given their low risk to the lender, such candidates receive better loan terms and cheaper interest rates. However, what if you need a personal loan but have a low CIBIL score?
You possess a chance to receive a personal loan, even though having a poor CIBIL score lowers your prospects. Here are some important tips on how to get a personal loan with a poor CIBIL score:
Choose a modest personal loan amount because the lending institution will view you as a significant risk if you request a large loan amount due to your poor CIBIL score. However, if the loan amount is small, your chances of getting a personal loan from the lender increase.
In addition to obtaining it in comparison to the greater quantity, paying back the less amount will also be simple. Always try to make it simple for both you and the lender to obtain a personal loan with a bad CIBIL score. That’s because, from the lender’s perspective, you are the defaulter.
The lender may consider your loan application despite a low CIBIL score if you have received a pay raise or have another source of income.
Telling the lender you have solid work and income may persuade them to approve the loan regardless of your credit rating. When you demonstrate your eligibility for a Personal Loan in this way, the interest rate can be higher.
Applying for an instant personal loan with a poor CIBIL score? Take a co-applicant or guarantor with you. Make sure you submit an application with a co-applicant. By doing so, your chances of getting a personal loan with a poor CIBIL score will increase significantly.
Ask your parents, partner, or siblings to be your co-applicant for the personal loan application. However, the co-applicant must have a strong CIBIL score at the time of application.
You can check your CIBIL score while using free services and viewing your CIBIL report. This is the moment to review your profile and make any necessary corrections if you detect any problems. Unclosed credit accounts that aren’t considered closed can result in a negative credit score.
Lenders consider several factors when evaluating loan applications, and a low Credit Information Bureau India Limited (CIBIL) score often makes it challenging to secure a personal loan. However, some financial institutions and online lenders offer personal loans to individuals with low CIBIL scores. To be eligible for a personal loan for low CIBIL, applicants typically need to meet certain criteria:
While traditional banks may require a higher credit score (usually 750 or above), some lenders may consider minimum cibil score for personal loan as 550-600. However, lower scores may result in higher interest rates.
Lenders prefer borrowers with a stable source of income. A regular job or a consistent business income can enhance your eligibility.
A stable employment history, especially with your current employer, can increase your chances of approval.
Providing collateral (like property, gold, or a fixed deposit) or having a co-signer/guarantor with a good credit score can improve your eligibility. This provides security to the lender in case of default.
Applying for a smaller loan amount increases the likelihood of approval. Lenders might hesitate to approve substantial amounts for individuals with low credit scores.
Lenders may assess your debt-to-income ratio if you have existing loans or credit card debt. Having a lower ratio indicates your ability to manage additional debt.
Expect higher interest rates and additional fees due to the increased risk for the lender. Understanding the terms and conditions is crucial, ensuring you can comfortably repay the loan.
When you apply for a low CIBIL score for personal loan, you’ll need to provide specific documents to enhance your credibility and improve your chances of approval:
Valid government-issued IDs such as Aadhar cards, passports, voter IDs, or driver’s licenses.
Some documents, such as utility bills, Aadhar cards, passports, or driver’s licenses, show your current residence address.
Previous or current job salary slips, last few years’ income tax returns, and bank statements for employed individuals.
A confirmation letter from your employer or proof of business ownership emphasizing your job stability or business continuity.
Although you have a low CIBIL score, providing a detailed credit report can demonstrate financial transparency to the lender, even with a poor score.
If you’re offering collateral, documents related to the asset (property papers, gold certificates, etc.) must be submitted.
If you have a guarantor with a good credit score, their identity and income proofs will be required.
Timely payment of credit card bills, EMIs, and other dues is crucial. Late payments negatively impact your score.
High credit card balances opposite to the limit can harm the CIBIL score. So, aim to keep the credit utilization ratio low for best results.
The length of your credit history matters. Keeping old accounts open showcases your creditworthiness over time.
A mix of credit types (credit cards, loans) can be beneficial. It demonstrates your ability to manage different types of credit responsibly.
Monitor your credit report for errors and unauthorized accounts. Dispute any discrepancies to maintain accuracy.
If you have overdue accounts, work on settling them. Negotiate with creditors to pay off old debts or set up a repayment plan.
Too many credit inquiries within a short time can signal financial stress. Apply for credit only when necessary.
Create a budget, save, and invest wisely. Sound financial management reflects positively on your creditworthiness.
Consider a secured credit card or loan if your score is very low. Responsible use can rebuild your credit.
Improving your credit score takes time. Stay patient, stay disciplined, and your score will gradually rise with responsible financial habits.
Loan eligibility for candidates with poor CIBIL scores is no longer a pipe dream. If you have a CIBIL score of at least 600, you may now apply for personal loans with a low CIBIL score, involving low-interest rates, less paperwork, and with other benefits.
So, choose the best lending institution in your town, meet all the above criteria and apply for a personal loan!
Getting approval for a quick personal loan with a CIBIL score of 500 is challenging. Typically, every NBFc and bank prefers individuals having a CIBIL Score of 750 or higher when approving a personal loan. Nevertheless, a few lenders can still approve the loan with a credit score 550 but with higher interest rates, fees, and costs.
Obtaining a personal loan as a self-employed individual with a low CIBIL score is quite tricky. The reason is that lenders often require a good credit history and stable income for approval.
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