How Does a CIBIL Defaulter get a Personal Loan?

When you apply for a personal loan, whether from a bank or an NBFC, they evaluate your loan application based on different eligibility criteria set by their respective institution. Your credit or CIBIL score plays a significant role in that, and it is one of the most important criteria that lenders use to determine your eligibility for a personal loan.

Your loan application is most likely to be approved if you have a decent CIBIL score (750 or above). On the other contrary, if your CIBIL score is poor (650 or less), chances are that your application will be rejected.

This article focuses on 7 ways to get a personal loan for CIBIL defaulters.

1] Who is a CIBIL defaulter?

Your CIBIL score does not come with a label, nor is the CIBIL defaulter a legal term. Borrowers with a low CIBIL score (less than 650) are often known as CIBIL defaulters, as these individuals tend to default on their credit obligations repeatedly.

1.1] 7 ways to get a personal loan as a CIBIL defaulter

If you have repeatedly made defaults on your debt in the past or have a low CIBIL score, your chances of getting a loan approved decrease significantly.

Lending money to a person with a poor credit score is too risky a proposition for financial institutions. However, you can still avail a personal loan despite a low CIBIL score. How? Below are some ways to avail of a personal loan for CIBIL defaulters.

• • Apply with a Guarantor/Co-applicant

If you have a consistent stable income at present but have a low CIBIL score as a result of your previous dues, you can still avail the option of a personal loan by applying with a guarantor or a co-applicant like your spouse or family member. Having a co-applicant or a guarantor significantly reduces the financial risk of the lender since the guarantor will be paying the same in case you default.

A co-guarantor with a good CIBIL score increases the chances of your application being approved. It is also important to keep in mind that in case you default on your payment, your guarantor or co-applicant will also take a hit on their CIBIL score.

• • Have a Stable Primary Source of Income

It is important to have a stable primary source of income to stand a better chance of getting your loan application accepted. Doing so helps increase confidence for your lender and reduces the risk of defaulting. Additionally, if 40% of your income is only used to repay the debt obligations, your chances of getting a loan approval increase even if you are a CIBIL defaulter.

• • Borrow at Higher Interest Rates

Getting a personal loan for CIBIL defaulters is a tough task. But, getting a loan at a higher interest rate is another option to get your application approved. Banks or NBFCs are likely to charge a higher interest rate if you have a poor CIBIL score. However, make sure to manage your expenses accordingly since borrowing at a higher interest rate may put a dent in your savings.

• • Choose Loans with Collateral

Personal loans are unsecured and granted without collateral. Hence, to ensure a low interest rate or approval of the loan application, you can take a loan with collateral to decrease the risk of the lender to some extent. Make sure you pay your dues on time, or else your collateral will be confiscated.

• • Opt for Online Lenders

You can also opt for a personal loan from the many online lenders, as they are a little more lenient while dealing with personal loan applicants with a low CIBIL score or a defaulter. It is important to demonstrate to the lenders that you can pay your dues on time and without much hassles if you want your loan application to get accepted.

• • Improve Your CIBIL Score

To improve your CIBIL score, ensure to make payments on time. Most lenders in India consider the CIBIL score as the most reliable method for evaluating a person’s creditworthiness. Therefore, improve your CIBIL score to get your loan application approved in the future.

• • Apply for a smaller amount

The chances of your loan application getting approved are higher if you ask for a small amount than a large sum. Lenders might charge you a higher interest rate or demand for collateral, but it improves your chances of getting a loan approved as there is comparatively less risk with a small amount even if you have a poor credit score.

Also Read: How Do You Get a Personal Loan Without Security?

2] How to remove your name from the CIBIL defaulter list?

A CIBIL score is a three-digit number ranging from 300 to 900, indicating your creditworthiness and the ability to pay back the money. The higher the CIBIL score, the higher the chances of your loan getting approved. A good CIBIL score also gives you the benefit of availing of loan offers with lower interest rates and favourable terms, which you can dictate.

You can improve your CIBIL score by following these steps:

• • Financial punctuality

Financial punctuality is one of the most important factors that affect your CIBIL score. If you make timely payments on your debt, your CIBIL score will improve. But, if you keep defaulting on your payments, your CIBIL score takes a hit. This is why you must always pay your credit card dues and loan EMIs on time.

• • Low credit utilisation

Many youngsters overspend with their credit cards as soon as they get their first paycheck. It is important to keep your expenditures in check and should ideally not exceed more than 30% of your credit limit.

• • A mix of secured & unsecured loans

You should have a good mix of both secured and unsecured loans in your credit profile. A secured loan requires you to offer security upfront as collateral. An unsecured loan does not require any collateral. The security for the lenders usually depends on their CIBIL score. It indicates that you have enough experience to handle both types of loans.

• • Regularly check your credit score

You must review your credit report frequently. In case you notice any discrepancy or error in your credit report, make sure to immediately notify the concerned credit bureau and get it rectified.

Also Read: How to Get a Personal Loan with a Bad CIBIL Score?

Conclusion

A CIBIL score is an important criterion to evaluate whether you are creditworthy or not. Securing a loan for defaulters is a challenge, which is why having a good CIBIL score is essential. A good CIBIL score ensures a swift application for loan approval and a hassle-free process. Whereas a poor CIBIL score can make the process tedious, and if you keep defaulting on payments, you would be put on the CIBIL defaulters list.

If you are on a CIBIL defaulters list, connect with us to know how we can help!