Personal loans are unsecured loans provided by banks and financial institutions based on your income and financial conditions. Since this is an unsecured and high-risk loan product, your CIBIL score matters the most in getting the loan approved. A high credit score increases the chance of loan approval and a low credit score may lead to loan rejection. However, some banks and NBFCs approve personal loans even if the CIBIL score is low. Let’s check and understand how to get a personal loan with a low CIBIL score.
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Why Should You Take a Personal Loan with a Low CIBIL Score?
Taking a personal loan with a low CIBIL score can be beneficial in certain circumstances. For example, if you want to improve your CIBIL score, you need to get a loan and repay it on time so that your credit score can increase. Also, when you urgently need funds for emergencies or significant expenses that cannot be postponed, a loan is a wise option. Mostly, the NBFCs easily provide you with a personal loan even if your CIBIL score is low. They offer loans even if you have derogatory marks on credit reports. However, they might charge a high rate of interest for the personal loan which can make your loan costly.
Also Read: Check here all the major details about Personal Loan and Tax Benefits
How to Get a Personal Loan with a Low CIBIL Score?
Getting a personal loan is a simple process and you can get the funds in your account within 30 minutes. However, if your credit score or CIBIL score is low, the loan approval might take a longer time. Check some of the useful and effective steps which will help you get a personal loan with a low CIBIL score below:
Approaching Non-Banking Financial Companies (NBFCs)
The chances of getting a personal loan with a low CIBIL score from NBFCs are high. Some renowned NBFCs that provide personal loans are Bajaj Finserv, TATA Capital, InCred Financial Services etc. All these lenders provide more flexible lending criteria compared to the banks. You can get personal loans from these financial institutions at around 12% to 20% interest rate.
Apply for a Secured Loan
There are some lenders that provide personal loans with collateral. In this case, you will have to mortgage your property whose value shall be equal to or more than the loan amount. The lender may also offer a low rate of interest as there will be less risk associated with the loan. Hence, collateral may help you get the loan easily at cheaper rates.
Find a Co-Applicant or Guarantor
If you apply for a personal loan with a co-applicant or a guarantor, the chances of loan approval will be high. Also, if the credit score of the co-applicant and the guarantor is good, then the bank will offer you a low rate of interest by observing the low-risk factor.
Opt for a Smaller Loan Amount
Opting for a smaller loan amount can improve your chances of approval when if you have a low CIBIL score. Lenders consider smaller loans as lower risk, making them more likely to approve your application. By borrowing a low amount, you not only increase the chances of securing the loan but also make the repayment process more easy.
Also Read: Check here and understand how to remove derogatory marks from credit report
Tips to Improve CIBIL Score
Improving the CIBIL score is important for taking loans and credit cards. However, increasing the CIBIL score takes a lot of time and strategy. You need to make all the payments on time and use your credit card wisely (up to 30-40% of the credit limit) so that your credit score can increase. Check some important tips to improve your CIBIL score below:
- Make all your credit card and loan payments on time. Late payments can harm your credit score as days past due in CIBIL will be reflected.
- Pay off any existing debt and avoid using your credit cards for bigger transactions. Keeping your credit utilisation ratio below 30% can positively impact your score.
- Having a mix of credit types, such as credit cards, personal loans, and mortgages, can increase your credit score faster.
- Avoid making multiple loan or credit card applications within a short period, as each inquiry can slightly lower your score.
- Check your credit reports for any inaccuracies or fraudulent activities. Dispute any errors with the credit bureau to ensure your score reflects accurate information.
- Keep your older credit accounts open, as the length of your credit history positively affects your score.
- Regularly use your credit cards, but ensure you pay off the balance in full each month to show responsible credit usage.
This was all about how you can get a personal loan with a low CIBIL score. Keep repaying your bills and loans timely to build a good CIBIL score. Check some FAQs on the same below:
FAQs
Yes. It is possible to secure a personal loan even if you have a low CIBIL score. Some NBFCs offer personal loans with low credit scores with high rates of interest.
A CIBIL score is a three-digit number ranging from 300 to 900 that represents an individual’s creditworthiness. It is based on their credit history, including loan repayments, credit card usage, and other financial behaviours. A higher score indicates better creditworthiness and increases the chances of loan and credit card approvals.
It is advisable to check your CIBIL score at least once every six months. Regular monitoring helps you stay informed about your credit health, detect any discrepancies or fraudulent activities, and take corrective measures.
The gold loan can be considered as a personal loan with collateral, where the gold pledged by you acts as collateral and the lenders approve your loan quickly.
Some of the renowned NBFCs offering personal loans are Bajaj Finserv, InCred Financial Services, TATA Capital etc.
No, checking your own CIBIL score is known as a soft inquiry. It does not affect your credit score. Only hard inquiries, which occur when a lender checks your credit report for a loan or credit card application, can impact your score.
Improving a CIBIL score is a gradual process and can take several months to a year or more, depending on your financial behaviour. Consistently paying bills on time, reducing outstanding debts, and maintaining a low credit utilisation ratio can improve your score.
Yes, you can improve your CIBIL score even with a poor credit history. By adopting responsible financial habits such as timely payments, reducing debt, and avoiding unnecessary credit inquiries, you can gradually rebuild your creditworthiness.
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