How to Get a Personal Loan with a Low CIBIL Score?

Jan 29, 2020

A lender would consider your credit history before giving you a personal loan. This is why a low CIBIL score could make it difficult to secure one. That said, personal loans for people with low CIBIL scores are available, and you can get one by following the steps below.

A personal loan can be a tremendous help when you need funds in a pinch. But before such a loan is sanctioned, you will have to go through various checks the lender performs. You can use the personal loan eligibility checker to get an estimate of the personal loan amount you are eligible for.

Among the first checkpoints that your application will have to cross is your credit or CIBIL score. But what is a good CIBIL score? And is a personal loan for people with low CIBIL score not available at all?

While it may not be as easy to get a personal loan with a low CIBIL score, you may succeed in getting one with some effort.

But first, let’s get an understanding of what a CIBIL score is and how it impacts your eligibility for a personal loan.

CIBIL Score and its Importance

Your CIBIL score is an indication of your creditworthiness. The Credit Information Bureau (India) Ltd., also referred to as CIBIL is one of the credit agencies authorized by the Reserve Bank of India (RBI) to calculate this score for an individual.

A valid CIBIL score falls in the range of 300 to 900, with 900 indicating most creditworthiness. The higher your score, higher is the chance that your personal loan application gets approved.

Your CIBIL score depends on your repayment record on your existing debts. Timely payments on all your outstanding debts like your credit cards, loan EMIs, etc. ensures that you have a high score. However, defaulting on loan repayment results in a score reduction. Personal loans for CIBIL defaulters are more likely to be rejected than for someone with a healthy credit history.

Must Read: How to Choose a Personal Loan

A high CIBIL score of 750 or more makes you an ideal candidate for any type of loan. Conversely, a personal loan for a CIBIL score of 550 or less may lead to rejection or a higher interest rate as you may be considered a ‘high-risk’ borrower, depending on the lender’s policy.

The lender will also consider your capacity to repay the loan which is determined by not just your credit score, but also other factors like bank balance, and job security.

Getting a Personal Loan When You Have a Bad CIBIL Score

Even though it is a challenge, you can still get a personal loan with a poor credit rating by taking the measures listed below:

1. Show Evidence of Income to Support Loan Repayments:

You may have a low credit rating but with a hike in salary or possibly having an additional income source can make the lender more favourable to your loan application. Moreover, if you can show evidence that you have a secure job with a steady income flow, the likelihood of your loan getting approved increases too. Do note that you may be subjected to a higher rate of interest.

2. Consider Applying for a Low Personal Loan Amount:

Your lender may perceive you as a high-risk candidate if you ask for a high personal loan amount with a low CIBIL score. From the lender’s point of view, your probability of defaulting on the loan repayment is higher.

If the amount of the personal loan is lower, the lender may be more inclined to grant the loan request. Also, the repayment of a lower amount will be far easier.

3. Apply for a Joint Loan or Get a Guarantor

If you have a low CIBIL score, then getting a co-applicant or guarantor with a good credit rating can help you get the personal loan faster. With permission from your co-applicant or guarantor, ensure that the KYC formalities are completed along with the necessary signatures on the relevant forms.

When the lender sees a co-applicant or guarantor with a good CIBIL score on your loan application, it definitely helps towards getting a better deal.

4. Resolve Errors in Your Credit Report

You may be having a hard time getting a personal loan on a low CIBIL score. However, it is possible that there may be misreporting or errors on your credit report. In most cases, this happens because your record hasn’t been updated with the latest information.

Must Read: How to Calculate Personal Loan EMI

While it is not really your fault, mistakes such as these can cause unwanted issues. To get ahead of the issue, regularly check your CIBIL score. If you find any errors, ensure that you report them to the relevant authorities and resolve them quickly. Ultimately, it will also work favourably by raising your credit score making you a worthier candidate for a personal loan.

5. Request Your Lender to Consider Your Case with an NA or NH in Your Credit Report

An inactive credit period in the last 36 months or absence of a credit period during the same period of time is marked by an NA or NH on your credit report. This translates into you not having a credit score at all in your CIBIL report.

Speak to your prospective lender and explain why there is a period of credit inactivity. It is possible that the loan will be approved with a higher interest rate.

Eligibility for a Personal Loan with a Low CIBIL Score

Your CIBIL score is a significant part of personal loan eligibility. That said, other factors also play a key role in your loan application being approved.

  • Use a personal loan eligibility checker to get an assessment of the loan amount you can avail, and the EMIs that you can expect to pay.
  • Check your CIBIL score. This can be easily done online. A medium to good score increases the chances of a personal loan being sanctioned. With a low score, you may still be eligible to get a loan but at a significantly higher interest rate.

Your best bet of getting a personal loan for a low CIBIL score is to try with the NBFCs, because they have more flexible eligibility criteria when compared to banks. If you have defaulted on a loan in the past for genuine reasons, be sure to explain that to the lender. As long as the reason is justifiable – for example a medical emergency– lenders may consider offering you the personal loan at a lower interest rate.

Key Takeaways

While these measures can certainly help you get you the personal loan even with a bad credit score, you still need adequate funds to repay it on time. If you default on the loan, your CIBIL score will plummet further down.

Alternatively, if you are having trouble getting a personal loan, you can also consider a loan against property.

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