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Need a Personal Loan But Have Low CIBIL? Here's What You Can Do

Need a Personal Loan But Have Low CIBIL? Here's What You Can Do

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Unexpected financial needs can arise at any point in life, disrupting even the most carefully planned budgets. These needs can range from milestones like a wedding or homeownership to unforeseen circumstances such as medical bills or car repairs. In such situations, a personal loan can provide a helpful source of funding.

However, before approving a loan, lenders assess your creditworthiness using a credit information report, often based on your CIBIL. Getting a personal loan for a low CIBIL score can be challenging because it indicates that the borrower may struggle to pay EMIs on time and could l end up defaulting. Let’s find out how to get personal loans with low credit.

CIBIL Score Range and What Does it Mean?

Your CIBIL score is a three-digit numerical summary of your credit history in India. It typically ranges between 300 (lowest) and 900 (highest). This score serves as a key indicator of your creditworthiness to lenders. Generally, a higher score signifies a more responsible credit history and translates to easier loan approvals and potentially better interest rates.

CIBIL Score Range Description Implications for Loan Applications
Above 750 Excellent Easier loan approvals - Potentially lower interest rates - Favorable term
700-749 Good Generally smooth loan approvals - Competitive interest rates
580-699 Fair Personal loan for low CIBIL score may be possible - Potentially higher interest rates
Below 580 Poor Personal loan with a low credit score may be difficult - Likely to face unfavourable interest rates and terms
CIBIL Score Range Description Implications for Loan Applications
Above 750 Excellent Easier loan approvals - Potentially lower interest rates - Favorable term
700-749 Good Generally smooth loan approvals - Competitive interest rates
580-699 Fair Personal loan for low CIBIL score may be possible - Potentially higher interest rates
Below 580 Poor Personal loan with a low credit score may be difficult - Likely to face unfavourable interest rates and terms

Reasons Behind Low CIBIL Score

Several common habits and situations can negatively impact your CIBIL score. Here are some of the most frequent culprits:

  1. Missed or Delayed Payments
    Late payments on credit cards, EMIs (Equated Monthly Installments) for loans, or any other outstanding dues can significantly damage your CIBIL score. Even a single missed payment can have a substantial impact, and the severity increases with the frequency and duration of delays.

  2. High Credit Card Utilisation
    Maxing out your credit cards or consistently maintaining a high credit utilisation ratio (outstanding balance divided by credit limit) indicates potential financial strain and can negatively impact your credit score.

  3. Multiple Credit Inquiries
    Making frequent applications for new credit cards or loans can lead to multiple "hard inquiries" on your credit report. While each inquiry might have a minor impact, a string of them can be seen as a sign of credit-hungry behaviour and can lower your score.

  4. No Credit Products
    If you've never used any credit products like credit cards or loans, you won't have a credit history and, consequently, no CIBIL score. This is common for young adults or individuals who have primarily relied on in-hand funds for transactions.

  5. Limited Credit History
    Having a very limited credit history, with only a single credit product used minimally and always paid on time, might not be enough to generate a CIBIL score.

Different Ways of Getting a Personal Loan with a Low CIBIL Score

A low CIBIL score doesn't necessarily mean you're locked out of getting a personal loan. Several options can still help you secure the funds you need. Here are some approaches to consider:

  1. Apply with Strong Income Proof
    A steady and demonstrably strong income is a major positive for lenders, even with a low CIBIL score. Providing robust income proof, such as salary slips, tax returns, or business income statements, can assure lenders of your ability to repay the loan.

  2. Applying Against a Collateral
    If you own an asset like a car or property, you can consider a secured loan. Secured loans use your assets as collateral. This lower risk for the lender often translates to a higher chance of approval and potentially better interest rates compared to unsecured personal loans.

  3. Apply with the Help of a Guarantor
    A guarantor is someone with a strong credit history who agrees to co-sign your loan application and take responsibility for repayment if you default. Having a guarantor significantly improves your chances of getting approved, especially with an NBFC personal loan for a low CIBIL score.

  4. Consider a Higher Rate of Interest
    Banks/NBFCs perceive borrowers with low credit scores as higher risks. To compensate for this risk, they might offer you a personal loan for a low CIBIL score with a higher interest rate. While this translates to higher overall loan costs, it can still be an option if you urgently need the funds.

  5. Look for Errors in the Credit Report; if Any
    Errors in your CIBIL report can significantly impact your score. It is important to regularly review your credit report and dispute any inaccuracies. Getting these errors corrected can improve your CIBIL score over time, opening doors to better loan options in the future.

How to Improve CIBIL Score?

Building a strong CIBIL score is an essential step towards achieving your financial goals.  While a low score may seem like a hurdle, there are well-defined strategies you can implement to improve it over time. Here are some key actions you can take to enhance your creditworthiness:

  1. Prioritise Existing Credit Card and Loan Balances
    Settling outstanding credit card balances and maintaining a low credit utilisation ratio is crucial for improving your CIBIL score. Focus on diligently paying down your existing debts. Ideally, strive to pay your credit card bills in full amount each month to avoid accumulating interest charges and late payment penalties that can negatively impact your score.

  2. Manage Credit Utilisation Effectively
    Living within your means is paramount when it comes to credit card usage. Don't overextend yourself financially by exceeding your comfortable repayment limits. A core principle of credit health is responsible spending.

  3. Establish a Positive Credit History (if applicable)
    For individuals with limited or no credit history, consider obtaining a secured credit card designed to help build a positive credit profile. Secured credit cards require a security deposit like FD, but using the card responsibly and making on-time payments can establish a positive credit footprint.

  4. Apply for Credit Strategically
    Avoid submitting numerous applications for loans or credit cards within a short timeframe. Each application triggers a "hard inquiry" on your credit report, which can impact your score. Lenders might perceive a string of applications as a sign of financial difficulty and may be hesitant to approve new credit.


Take Control of Your Financial Future

Building a strong CIBIL score empowers you with greater financial flexibility. Remember, a low CIBIL score doesn't have to hold you back from achieving your financial goals. For those planning to handle unexpected expenses, KreditBee can be your ideal partner for a personal loan with a low CIBIL score.

Key benefits of a KreditBee low CIBIL personal loan

  1. 100% Online Process

  2. Hassle-free Documentation

Take that first step today. Check your eligibility for a personal loan without CIBIL.


Frequently Asked Questions

A CIBIL score above 750 is generally considered excellent and can lead to easier loan approvals and potentially lower interest rates. However, you may still qualify for a personal loan with a lower score, though interest rates might be higher.

Yes, it's possible to get a personal loan with a bad credit score (below 580) in India, but it might be more challenging. Options include secured loans, applying with a guarantor, or exploring lenders specialising in lower credit scores, though interest rates might be higher.

While significant improvement takes time, some steps can help. Prioritise paying off outstanding debts, especially credit cards. Maintain a low credit utilisation ratio and avoid missing loan or credit card payments. Consider getting a secured credit card and using it responsibly.

There are various personal loan options in India. Secured loans require collateral like a car or property. Unsecured loans don't require collateral but may have higher interest rates. You can also explore instant personal loans for specific purposes like weddings or debt consolidation.

The required documents for a personal loan application in India can vary depending on the lender. They typically include KYC documents (proof of identity, address, and residence), income proof (salary slips or bank statements), and loan application forms.

AUTHOR

KreditBee As a market leader in the Fintech industry, we strive to bring you the best information to help you manage finances better. These blogs aim to make complicated monetary matters a whole lot simpler.