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While fetching your credit report from the credit bureau like TransUnion CIBIL, if your respective lending bank or NBFC finds a low CIBIL score, the chances of loan approval drops drastically. Most Banks and large NBFCs are unlikely to approve a personal loan application with a low CBIL Score, which is usually anything below 720 or 700.
If your CIBIL Score is low, getting a personal loan could be a really daunting task, but not an impossible one.
Choose lenders that accept Low CIBIL scores
Applying for a personal loan from the wrong lender, like a large Bank, can worsen the case for consumers with low CIBIL score as it may bring the score further down. Choosing the right lender is key as options are limited.
There are certain lenders, especially new-age fintech NBFC lenders that offer personal loans to select applicants with low CIBIL score. These NBFCs often have a more relaxed credit score criteria, as compared to private and public sector banks. With these NBFCs, you may be able to secure yourself a personal loan but do note that it will come at a significantly higher interest rate. Visit Paisabazaar to compare offers from most-suited lenders.
Adequate Disposable Income
Ensure that you have a stable income source that provides adequate monthly disposable income to repay your EMIs. This is applicable for self-employed professionals, New-to-Credit individuals or applicants with no credit history.
You may need to provide additional documents to prove your financial stability. These documents could be the account statements of your mutual fund portfolio, demat accounts etc. Some lenders may consider offer a loan even with your low CIBIL score if they see financial stability and repayment capacity.
Stable Job with Reputed Employer
Those employed with reputed corporates/MNCs or public sector organizations are considered to have higher income certainty than others. Hence, lenders may accept the personal loan applications made by such applicants, especially those with stable employment history, on the basis of their EMI repayment capacity, job stability and the reputation of their employers.
Include a Co-applicant or Guarantor
Adding an earning family member with a good CIBIL score, as a co-applicant to the personal loan application reduces the credit risk for the lender. This is because the co-applicant also becomes equally responsible for the repayment of the loan. Hence, if you are able to add a co-applicant, who has a good credit score, it may help you get your personal loan application approved.
Request a Smaller Loan Amount
If you were planning to apply for a higher loan amount, then you need to reduce it. Lenders might not offer loans with higher loan amounts because of the risk of default involved. Check with your lender if a smaller loan amount can be sanctioned
Offer Collateral for a secured loan
If possible then provide a collateral with the lender to reduce their risk in offering you a personal loan of smaller amount. The collateral/security can be in the form of fixed deposits, savings account, secured credit card or gold loan. This would then become a secured loan, and less risky for the lender.
Do note while it is possible to get a loan with a low CIBIL or Credit Score, but the reason for your low score is critical. If you have major defaults in your credit history and outstanding dues on your loan accounts, your chances of getting a loan is minimal. Hence, one should first focus on building your CIBIL score, for future credit readiness.
Tips to Improve your CIBIL Score
Check reason behind low score, if not known already
- Look out for errors or frauds
- Pay any outstanding amount immediately
- Repay all existing EMIs and credit card bills in full, on time
- Avoid applying for multiple loans or credit cards
Since, your CIBIL score shall be an important factor every time you plan to avail credit, either personal loan, home loan or a credit card, it is advisable to take the right actions to improve and build your CIBIL score before you apply for any new loan or credit card. This will enable you to avail loans and credit cards more conveniently and seamlessly in future.
Also Read: How to Improve Your CIBIL Score