When it comes to applying for a personal loan, the importance of CIBIL score goes hand-in-hand. It is one of the parameters on the basis of which, the bank or the lender would decide when to approve the application of a personal loan or not. For the first time applicant of a personal loan, a CIBIL score may not be considered but if the person has any personal loan apply in the past, the same is likely to play a crucial part. To understand why this score is important, one would need to know what aCIBIL score is.
CIBIL or credit score
A CIBIL score or credit score is a three-digit numerical value which defines the financial behavior/history of a person as a borrower. It tells the lender about the creditworthiness of a person depending on his/her credit history, credit report and the likes. A CIBIL range from 300 to 900 and the score over 700 is considered good for getting a personal loan. In case of a CIBIL score below that, say between 600 to 700, the lender may consider your profile to be satisfactory. However, problems are likely to pop-up when the score is even lower than that.
CIBIL score is an important parameter based on which your creditworthiness is decided by the lender. Source: ETMONEY
Now, here are a few points that would make you understand the reasons behind a low credit score-
- If you have multiple loans at the same time, your credit score would be lower
- If you use your credit extensively, the credit score would be lower
- If you have missed paying your bills before the due date, your score will be hampered
- Rejected loan application in the past
- Paying only the minimum amount on credit card
In addition to that, if a person does not have a credit history, his/her credit score is likely to be lower. But this factor would not have any negative effect on his application. Moreover, people can also get a personal loan with a low credit score. These can be considered as alternatives to getting a personal loan without a good credit score.
Here are six ways how one can make a personal loan apply and get that approved even with a low credit score.
1. Employer-lender tie-ups
If you are a professional, there are possibilities that your company has a tie-up with a bank or a financial institution. In this case, the bank can offer you a personal loan even if the credit is lower. Here, the lender may check your employment history to confirm how long you have been working with a particular brand. The more years of employment, the better the chances of getting a personal loan approved.
2. Reliable income proof
Your employment plays a vital role every time you deal with finance. If you are working with a reputed firm, the chances of getting your loan approved are high. On the other hand, if you have a good earning, which is sufficient enough to pay the EMI amount in the amortization period, the lender would consider your profile eligible.
3. Use the advantage of a joint loan
You can find someone in your family having a good credit score. If yes, you can use their credit score and combined with yours. This way, there is a fair chance that your personal loan apply would get approved.
4. Take a guarantor
Again, one of your family members who have secured a good credit score can be of great help. You can ask them to become a guarantor of your personal loan. If this is done, the lender will check the credit score of the guarantor, thus providing you with a hassle-free experience.
5. Non-banking Finance Company or NBFC
Non-banking Finance Companies can be considered for personal loan apply if you think your credit score is low to qualify. These financing companies are eager to provide loan to the borrowers and if a customer has legal documents, then the fret of having a low credit score would never be an issue. However, they may charge a bit higher rate of interest in return.
6. Use collateral
In worst cases, collateral can be one of your strongest weapons when you want to apply for a personal loan with a low credit score. Although, a personal loan is an unsecured loan where no collateral is required, in case you need financial assistance badly and your personal loan apply might get rejected, use collateral such as gold, fixed deposit, land, etc.
Notably, application for a personal loan is way easier now than it used to be. In fact, some of the lenders offer to process a personal loan within a few hours. This is due to the healthy ground that personal loan has gained in today’s time. And there is no denying that loan plays an important role in the lives of people by saving their cash, FDs, RDs, etc.
So, with the growing demands and easier processing, you can apply for personal loan now, even you don’t have a good credit or CIBIL score.