A common question asked is whether having a low CIBIL score makes it impossible, or extremely difficult, for you to avail a personal loan. The answer is not as straightforward as you’d expect it to be. To understand this clearly, we’ll first elaborate on CIBIL score, how to access it, and how it affects the personal loan process.
What is the CIBIL score?
Simply put, CIBIL score is a three-digit numeric summary of your credit history. This score is obtained using the credit history found in the Credit Information Report (CIR); a document containing your credit payment history across loan types and credit institutions over a period of time. The CIR doesn’t contain details of your savings, investments or fixed deposits.
If you’ve made timely payments of your credit card bills and loan EMIs, your credit score is likely to be high. Your CIBIL score ranges between 300-900, with 900 being the highest, and a score above 750 is generally considered good. The closer your score is to 900, the better your credit rating is. A CIBIL score takes time to rack up and usually takes between 18 and 36 months or more of credit usage to obtain a satisfactory score.
You can get a Financial Health Check Report on Finserv MARKETS for free. The report is personalized, extremely simplified and in depth, and also guides you through the process of procuring the perfect personal loan tailor-made for you.
What happens if you have a low CIBIL score?
When someone approaches a bank for a loan, the lender first checks the applicant’s CIBIL score and report. The bank considers people with low CIBIL score as ‘high-risk’ candidates. In such cases, the banks are usually unwilling when it comes to giving out personal loans without CIBIL. The banks have access to your entire credit history – whether you’ve repaid, defaulted or pre-closed previous loans, and how much of your income goes in repaying – and decide whether or not to give you a personal loan keeping facts in mind. You can find lenders who’ll be willing to give you the money, but will usually charge a very high rate of interest.
A high CIBIL score gets your personal loan approved while letting you negotiate the interest rate, loan tenure and repayment schedule. A mediocre CIBIL score gets you the loan, but with higher than usual interest rates. The loan amount may also be considerably lower than what you applied for. A low CIBIL score is considered extremely poor creditworthiness and your personal loan without CIBIL, will most likely be rejected.
What affects your CIBIL score?
An irresponsible payment behaviour, high credit utilization ratio and outstanding debt all contribute to a low CIBIL score. Many factors affect your CIBIL score; the most important of them being the track record of your past payments. If you have existing debts and have made delays in payments, your CIBIL score is negatively affected, which in turn makes it difficult for you to get a personal loan with low CIBIL score. Multiple write offs and settlements of loan also adversely affect your CIBIL score. Apart from all this, banks also consider a ratio of your income against any existing loans. The higher this ratio, the better are your chances of getting a personal loan.
How to get a personal loan with a low CIBIL Score?
Challenging as it is, it’s still possible to secure a personal loan even with a low CIBIL score. One way to make that happen is to prove your income can support you EMI payments. A recent increase in salary or an alternative source of income can convince a bank to provide you with a personal loan. The drawback here is that the interest on such a loan will be much higher than the usual rates.
Another way to tackle the low CIBIL score problem is to ask for a lower personal loan amount. Seeking a high amount for a personal loan only indicated greater risk to the bank. For the bank, your low credit score is a worry that you may default on your payments. Applying for a personal loan with a lower amount poses lesser risk and increases your chances of getting that loan. You could also apply for a personal loan with a co-applicant or guarantor. If the co-applicant has a good credit score, it is more likely for you to secure a personal loan.
Once you’ve put into practice such steps to improve your CIBIL score, you can opt for the personal loans available on Finserv MARKETS. The personal loans available on Finserv MARKETS come with flexible repayment tenures and zero collateral. You can easily avail loan amounts of up to Rs. 25 lakhs on Finserv MARKETS simply with the click of a few buttons and minimal documentation!
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