Personal Loan for Low CIBIL Score Applicants – Eligibility Criteria and How to Apply
Overview – Personal Loan With Low CIBIL Score
Be it for a medical emergency, a sudden business opportunity, a big-ticket purchase, or a major repair, a personal loan could give you access to extra cash, almost instantly. But, in order to get a personal loan, you must first satisfy certain conditions.
An important factor that a lender considers while reviewing your loan application is your credit score. While most lending institutions prefer those with a high score, it is not impossible to get a loan with low CIBIL score as well. Let us see how.
How to Get an Instant Loan with a Low CIBIL Score?
1. Show Income Proof
Showing proof of a regular income could reinforce your application because it is considered to be an indicator of your ability to repay the loan on time. If you are self-employed, you can submit audited financial statements. At the end of the day, it is your prerogative to show your financial standing in a positive light. It may be easier for you to get an NBFC personal loan for a low CIBIL score, provided you can convince the lender that you have the resources to repay the loan on time.
2. Resolve Error in Credit Report
Ensure that your credit report is up-do-date and error-free. For instance, the CIBIL report may not always reflect changes in your credit score immediately. Check whether your lender is using the CIBIL report with the updated score. If you find an error in your score, use the CIBIL portal to initiate a dispute resolution request. Add supporting documents and evidence to validate your claim. After verifying your claim, CIBIL will update your score report.
3. NA or NH in Credit Report
If you have not used your credit card for a sufficiently long period of time or don’t have a credit history longer than six months, it will be reflected in your credit report with a score of 1 or as NA or NH. While this doesn’t necessarily mean a poor credit rating, some lenders have policies that prevent them from granting loans to borrowers with such scores. However, if you have a reasonable explanation, a lender may be willing to consider and even approve your loan application.
4. Apply for a Lower Amount
To get an instant loan for a low CIBIL score, try applying for a loan which is on the lower side. Lenders usually associate higher risk to a bigger loan amount. Since a smaller loan is usually viewed as lower in risk, a lender may be more amenable to your application.
5. Apply with a Guarantor
A guarantor is a person who guarantees the repayment of the loan on your behalf. So, essentially, the liability of making the loan repayment lies with the guarantor. Moreover, a guarantor is a person with credibility and a high credit score. Getting a personal loan for a low CIBIL score could become slightly easier if you have the backing of a guarantor.
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How Does CIBIL Score Affect Your Loan Eligibility?
The CIBIL score represents your creditworthiness as a loan candidate. It looks into how well you have managed your previous loans and how prompt you were with repayments. Since these are important considerations for any lender, your CIBIL score becomes an important eligibility criterion.
Lenders want to reduce their risk of lending by granting a loan to someone, who is capable of repaying it in full. For this reason, financial institutions and banks, as lenders, set a minimum credit score eligibility criterion. Typically, a score of 750 is considered good and gets progressively better as you go higher. But, lenders like Navi offer instant cash loans to individuals with CIBIL scores of 650 or more.
But as discussed, even those with low scores may be eligible for a personal loan with a bad CIBIL score, provided they satisfy certain other conditions. For example, pledging an asset, which can be liquidated to recover the loan if you default, or applying with a co-lender, who has a good financial standing.
The eligibility criteria usually varies from lender to lender. So, check them carefully before applying for a loan.
How to Improve Your CIBIL Score?
1. Pay your Bills on Time
You could build a good credit history by paying your dues on time. This includes your loan EMIs and even your monthly credit card bills. To stay on track with repayment of your loans, you could link your bank account and set up auto-debit.
2. Don’t Max Out your Credit Cards
Your credit card comes with a credit limit. This is the maximum amount you can spend on your credit card every month. However, utilising the available credit in full can be detrimental to your credit score. Ideally, you must spend less than 30% of your credit limit to maintain and build a good CIBIL score.
3. Get Errors Rectified
There is a chance that your credit report has factual errors. CIBIL sometimes overlooks the recent transactions, which can negatively impact your score. If you find any errors in the report, make sure you raise a query with CIBIL and get it rectified at the earliest.
4. Reduce the Number of Hard Enquiries
When you check your own credit score, it is counted as a soft enquiry. This does not affect your score, no matter how often you check it. However, if a lender extracts your report from CIBIL, it is counted as a hard enquiry. This is done every time you ask for credit. Too many hard enquiries can also affect your score.
5. Improve your Credit Mix
There are various kinds of loans, short-term and long-term, secured and unsecured, and loans for different requirements. Having diversity in your credit portfolio will help you manage your finances better. Have a fair mix of short- and long-term loans, revolving credit, secured, and unsecured loans, etc. Please note that too many unsecured loans can also affect your score negatively. Thus, make sure you only apply for loans that you can repay on time and balance out the unsecured loans in your portfolio.
6. Manage any Joint Applications
The obligation to manage and repay a loan lies with both the borrowers, in case of a joint application. Default on a loan by one will affect the credit score of the other as well. For example, if there are add-on credit cards on your primary credit card account, make sure that dues for all the others are settled on time. Besides, you must decide and ensure optimum credit utilisation on all the cards or credit lines.
7. Monitor your Credit Score
Closely monitor your credit score. It is advised that you check your credit score at least once every 6 months. This will not only help you stay on track with your financial goals, but also report factual errors in the CIBIL report, if any.
What are the Documents Required for a Loan with Low CIBIL Score?
To apply for a low CIBIL personal loan, you will need the following documents:
- Identity proof, such as an Aadhaar Card or PAN Card.
- Address proof, such as your passport, driver’s license, electricity bills, or any other utility bill.
- Your latest salary slips if you are a salaried individual.
- Your bank statements for at least the last six months.
- Passport-size photographs, where applicable.
Eligibility to Get Personal Loan for Low CIBIL Score Applicants
1. Income
Having a stable income is a must while applying for a loan, especially if you have a low CIBIL score. This gives the lender more confidence in you as a loan candidate. Typically, the minimum monthly income requirement for a personal loan is ₹15,000. However, this could vary from one lender to another.
2. Employment Proof
You must show proof of employment when applying for a loan with low CIBIL score, whether you are self-employed or salaried. If you are self-employed, the lender may ask for audited financial statements to establish how financially stable you are. On the other hand, for employees, your application can get a boost if you work with a reputable company.
Final Word
Getting a personal loan for a low CIBIL score is certainly possible. Case in point is Navi Instant Cash Loan, which is available to individuals with CIBIL scores as low as 650.
In fact, there could be situations where getting a personal loan with low cibil score, may still be the most viable solution to your last-minute cash needs. By showing a proof of regular income or pledging an asset, you may successfully get your loan approved. Alternatively, wherever possible, you could try getting a guarantor on board.
FAQs
Yes, there may be instances where your credit report has errors or the latest information is not updated. In such a case, you must raise a complaint with CIBIL and upload relevant documents to support your claim. Once your claim is validated, your credit score will be updated.
Having a job helps you get a loan faster. If you don’t have a job, you may need a co-signer to apply for a loan. However, ensure that the co-signer has a good financial standing and strong credibility.
In general, to get a low cibil personal loan, you will need to show your identity proof, address proof, salary slips, bank statements, and passport-size photographs. However, please check with your lender for the document list since it can be different for different lenders.
Yes, credit cards have a massive impact on your credit score. If you pay your monthly credit card bills on time and maintain low credit utilisation, your score can significantly improve with time.
