A solid credit score is generally essential when applying for a personal loan. What happens, however, if your credit score is less than stellar? Is it still possible to get a personal loan?
To be qualified for a personal loan, you must meet the rules set by your lending institution. One of these factors is that your CIBIL score is in the range most banks consider healthy.
This blog intends to shed light on the potential of having a low CIBIL score personal loanand explore the options open to people in such situations.
What is Meant by a CIBIL Score?
The credit score reflects your financial habits and shows how well you manage credit based on your current commitments and income. Credit bureaus assess it as a number between 300 and 900 depending on your repayment history, credit type, duration, current credit liabilities, and credit exposure. If you want to check your CIBIL score, there are personal loan apps that can help you.
Banks typically prefer individuals with a credit score of 750 or higher and are more likely to have their loan applications accepted. There is also a good probability that they will be offered personal loan with lower rates because they are considered low-risk consumers, and banks will be prepared to provide their best rates to attract them.
Receiving a Personal Loan with a Low Credit Score
Having poor credit makes getting a personal loan difficult. Low credit scores may make borrowers riskier in the eyes of banks, resulting in fewer available loan options and unfavourable terms. Individuals with bad credit may have difficulty getting personal loans from traditional banks.
However, it’s crucial to remember that each financial institution has unique lending standards, so getting a loan is not completely impossible. If your CIBIL score is less than 750 for whatever reason, you may still be able to obtain a low CIBIL score personal loan.
Get a Personal Loan with a Low Credit Score
If you want to get a instant personal loan with a low credit score, here are some valuable points you should consider.
1. Establish a good income to support EMI payments
If you have received a wage rise or have a second source of income, bank staff may still consider your loan application even with a poor CIBIL score. Despite your score, the bank team might authorise the loan if you demonstrate to them that you have a reliable source of income. The interest rate may be higher if you use this to prove that you qualify for a personal loan.
2. Obtain a joint loan
Use a co-applicant when you apply. You can get a loan with a poor CIBIL score by applying with a co-applicant. You can submit a loan application with your parents, partner, or siblings. The co-applicant must, nonetheless, have a high CIBIL score at the time of application.
3. Verify and correct any errors in the credit report
CIBIL reports can have identification, financial, credit history, repayment, and other inaccuracies. Such inaccuracies may reduce your credit score without it being your fault. It’s essential to regularly check your credit report for issues and report them so that they can be corrected.
4. Request an NA or NH on your credit report from your bank
If you haven’t used credit in the recent 36 months, it will show up on your credit report as History Not Available (NA) or No History (NH). You can speak with your bank about your inactive credit in such circ*mstances. Your position will be taken into account by the bank, and you’ll likely be presented with a personal loan at an interest rate that is a little bit higher.
Examining Loan Options in Case of a Low Credit Score
1. Personal loans with security
Personal loans with collateral are one option for those with bad credit. These loans need collateral, which the lender can foreclose if the borrower defaults. Collateral can include a savings account, a car, or a piece of property. Borrowers lower the risk for lenders by pledging collateral, increasing the likelihood that their request will be approved.
2. Community banks
Community banks are renowned for their individualized approach to lending. They frequently consider elements other than credit ratings, like employment history and past interactions with the institution. Compared to some regular banks, these financial institutions might be more willing to engage with people who have bad credit and offer better terms.
3. Payday loans
Payday loans are small, short-term loans frequently offered by unconventional lenders. They are made to be paid back with the borrower’s subsequent salary. Payday lenders frequently have softer credit standards, making them more accessible for people with bad credit. Before pursuing this choice, it is advisable to give it great attention because it frequently has higher interest rates and expenses.
4. Online lenders
For those borrowers with low credit ratings, the growth of personal loan app platforms has created new opportunities. These apps use alternative techniques for evaluating credit, considering several other characteristics besides credit scores. They use technology to accelerate the loan application and funding processes by streamlining the loan application procedure.
Conclusion
Although having a low credit score can make getting a personal loan more difficult, it is not impossible. But you should never forget to compare banks, carefully read the loan terms, and make judgements based on your financial situation. You can pave the route to obtaining the finances you require with patience and devotion while steadily enhancing your creditworthiness for upcoming financial endeavours.
Also, responsible borrowing is essential to preserving financial stability, regardless of your credit score. Examine your financial standing, spending plan, and capacity for payback before applying for a personal loan. To prevent an extra financial burden, only borrow what you need and can afford to repay.
