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

Just like your physical and mental health, your credit health matters too. Your credit score is no longer just a number. It can open up a lot of new avenues and experiences for you. Credit scores are also called CIBIL scores. If you have a low CIBIL score, personal loans and other types of loans are not readily approved by the banks and NBFCs. In this article, we will talk about the importance of a good CIBIL score and how to get a personal loan with a low CIBIL score.

A] Importance of Having a Good CIBIL Score

CIBIL score is a three-digit number ranging between 300-900, calculated depending on the financial history of a person. The higher your score, the better the chances of getting your loan application approved. Your CIBIL score takes into consideration multiple factors like on-time payment of dues, number of loan accounts, outstanding loan amount, etc.

Different banks and NBFCs have different criteria for issuing a loan to their applicants. Also, the CIBIL score is important and carries many advantages to both: the borrower and the lender.

Let’s take a look at how:

• CIBIL Score lets you evaluate your credit status and how well you manage your finances. A person with a good CIBIL score can be trusted with loan money because of their good finance management. On the other hand, a person with a low CIBIL score might not get that luxury.
• A person with a high CIBIL score might get loans approved by the banks or other institutions at a lower interest rate and minimum paperwork. It saves valuable time. Plus, it provides a financial advantage. On the contrary, a person with a poor CIBIL score might not get a loan or get it at a comparatively higher interest rate.

Note: Loan rejection is not based only on a poor CIBIL score, but a lot of different aspects are also considered.

• If you have a good CIBIL score, it gives you a Higher Negotiation Authority to bring the interest rate.
• Exciting bank offers are another perk of having a good CIBIL score. People with a good credit score have a high credit card value, better privileges and cashback.

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

B] What are the issues you face while taking a personal loan with a low CIBIL score?

If you have a low CIBIL score, a personal loan or applying for any other loan might result in a lot of issues, such as:

1. High-Interest rates:

A poor CIBIL score can cause problems like banks charging you higher rates on your loan.

2. Loan rejection:

Many banks and NBFCs do not prefer lending money or personal loan to low CIBIL scorers because they repeatedly defer on their dues or do not pay the money (EMI) on time.

3. Securities:

If you have a poor CIBIL score and want to apply for a personal loan, the banks might be reluctant to offer you a loan without security. Commodities like gold, platinum, or your land or home are mostly preferred securities by banks.

4. Business problems:

If you are an entrepreneur with a great and upcoming idea, but you have a poor CIBIL score, chances are your application for the loan will comparatively create more hassle than a person with a good CIBIL score. This might jeopardize and put your business at risk.

5. Rental issues:

A person with a poor CIBIL score might face a few problems while renting a property as some landlords usually run a credit check before renting. In case of an extremely low CIBIL score, the landlord might ask for a higher security deposit to cover the risks of a bad score.

5 ways to get a personal loan when you have a bad CIBIL score

If you have a low CIBIL score and want your personal loan application to be approved, use these five techniques to secure a personal loan.

1. Expand your search:

If you need a personal loan with a bad CIBIL score, don’t just look towards banks for loans. Expand your search and visit online financial marketplaces that provide loans from different lenders based on your CIBIL score, income, location, type of job, etc.

2. Explain your situation to your manager:

COVID has been hard on most people in India and the world alike, so it is a good idea to explain to your relationship manager what challenges you are facing and what steps have you undertaken to make the re-payments. This might or might not work, but it is worth a try to talk to your relationship manager directly. Chances are, even if he cannot help you with one situation, he might be able to help you with something else in the process.

3. Show collateral/security against the loan:

It is always a good idea to show collateral or proof of security against your loan because it allows you to get interested at a low rate. You can use a less important item as security to get your loan approved. Likewise, using something more valuable as collateral can lead to extra motivation to pay your EMI on time.

4. Apply for a joint/Guarantor loan:

You can get an instant loan without a CIBIL score by applying for a loan with your spouse/family member who has a good credit score. It improves the chances of getting your loan approved at a low-interest rate. The co-applicant also acts like a joint loanee or a guarantor. In addition, this reduces the risk by the lender since the co-applicant/guarantor also becomes liable for loan repayment in case the primary borrower defaults on his payment. It is important to note that your co-applicant should be aware of any such event since they are also participating in the loan.

5. Loan a small amount:

When you borrow a loan, try and borrow a small amount. You can use this loan to improve your credit score by repaying on time. Taking a small loan from the bank also lets you test your ability to manage your finance. It will also help you to judge your ability to repay a bigger amount in the future.

Also Read : How Does a CIBIL Defaulter get a Personal Loan?

Conclusion

A good CIBIL score for a personal loan is very crucial. Maintaining a good CIBIL score shows your ability to manage your finances and tests your repayment skills. An ideal CIBIL score is anything above 750, and a healthy CIBIL score helps in the long run to secure all types of loans.

Need help securing a personal loan? Get in touch with us to know how we can help!