One of the most widely availed credit options i.e. personal loans has seen exponential rates of growth over the years. In fact, they have witnessed a 96% rate of increment in just a few years.
Before applying for a personal loan, one must take into account a number of factors, the foremost being personal loan eligibility criteria. One of the most crucial components of personal loan eligibility is having a good CIBIL score.
A CIBIL score is a 3-digit number which pictures your credit history into a numerical value and reflects your creditworthiness. The score ranges from 300-900 and can change depending on your repayment habits and credit usage.
If you repay the credit in a timely manner and have a good credit score, you can easily secure a higher loan amount with a good interest rate and flexible loan tenures. However, if you have a history of loan default, your CIBIL score would likely take a hit and be lowered. Owing to this, it might be relatively difficult for you to get loans in the future. However, you can opt for a personal loan even if you are a CIBIL defaulter and have a low credit score. Here’s a detailed rundown of everything you need to know about applying for a loan with a low CIBIL score.
There are a number of steps one can take to qualify for a personal loan despite having a low credit score and history of default. Some of them are highlighted below:
If you are economically stable but have a low CIBIL score due to previous defaults, you can still have your personal loan application approved if you get a loan in the presence of a guarantor. Having a guarantor mitigates the risk the lender would be taking by providing you with a loan, since the guarantor would pay up if you don’t. This, thereby, increases the chances of your application being approved. However, it is crucial that your co-applicant or guarantor has an excellent CIBIL score. You should also bear in mind that in case of default on your part, your guarantor will also take a hit.
You can also publish the necessary documents to prove that your current income is sufficient to pay your EMIs. Ensure that you can demonstrate a good FOIR (Fixed Obligations to Income Ratio). Your FOIR showcases that the income you earn is high enough to meet all your financial obligations. This will help to ward-off concerns about your repayment capabilities.
Another way to obtain a personal loan for CIBIL defaulters is to get a personal loan at higher interest rates. While this may hike your financial outgo, it can increase the chances of your application being accepted.
Certain loans require you to pledge collateral, i.e. your fixed assets, in order to avail of a loan. You can pledge assets like property, gold or even fixed deposits as collateral. This makes the borrower less of a risk to the lending institution since they can seize the assets in any question. However, you must ensure timely repayment of such secured loans to avoid seizure of your assets.
You can also opt for a personal loan from online lenders, as they are a tad more lenient while dealing with personal loan applications that have low credit scores. If you are applying for a loan with an online lender, you must ensure that you can demonstrate an iron-clad ability to repay.
You can take a number of steps to improve your CIBIL score and avoid taking wrong turns that might lead to the lowering of your score. The following factors may reduce your credit score:
Your credit utilization habits
Applying for a loan at multiple places
Faulty information on your credit report
Frequently exceeding your credit limits
You can adopt ways like checking your CIBIL reports at least twice a year to ensure all the information mentioned is accurate and up to date. Avoid multiple loan applications and maintain a healthy mix of secured and unsecured loans in your financial portfolio. You can check your CIBIL score with the help of the free Financial Health Check Report on Finserv MARKETS. The report goes one step further and also gives a detailed picture of your financial stability as well as provides personalized insights to help you improve your score.
Once you have effectively improved your credit score, you can opt for the Bajaj Finserv Personal Loan on Finserv MARKETS. You can get instant loan approval in 3 minutes and disbursal of the loan amount into your bank account within 24 hours. Applying for a personal loan on Finserv MARKETS is hassle-free and requires minimum documentation.