Personal loans are unsecured loans offered by Banks and NBFCs to meet short term expenses. Personal loan is offered for vacations, weddings, travel, medical emergencies, etc. Since personal loans are insecure, lenders rely on the borrower’s credit score before approving the loan amount.
What is CIBIL Score?
CIBIL (credit information bureau limited) score is a three-digit number that depicts the borrower’s creditworthiness. CIBIL score can range from 300 to 900. A credit score of above 750 is considered ideal. Your credit score is calculated based on your creditworthiness, credit history and entire repayment history.
A credit score is one of the most crucial factors before approving the loan. If you have a credit score lower than 600, finding a personal loan at a reasonable interest rate can be challenging. A low credit score presents a negative image of the borrower before the lender, and the lender thinks twice before approving a loan. Having said that, if you have a bad credit score, it is not impossible to get a personal loan. This blog deals with getting a loan if you have a bad CIBIL Score.
Some of the common reasons for a bad credit score could be:
Late repayment of due credit: This is one of the most common reasons for a bad credit score. Paying off your dues on time improves your credit history and credit score. Thus ensure that you pay all your dues on time.
No credit history: if you are buying a loan for the first time, you won’t have anything in your credit history. It can also lead to a low credit score.
High exposure to unsecured credit: A bad credit mix is when the unsecured loan is more than the secured loan taken by the borrower. More unsecured loans put the person at more credit risk. There should be a balance between various credits taken by the borrower.
Let us now discuss the ways through which you can get a loan with a bad CIBIL score:
High and steady Income: For some reason, if your CIBIL score has got bad, you can show your income proof to the lender before they make up their mind. If you have a high income and job stability, the chances of your loan getting approved increase. As job stability is one of the most crucial factors lenders consider, having a stable job can help you secure the loan that you need.
Apply for a low personal loan amount: Availing a low loan amount would expose the lender less to the risk. Thus, you can ask for a low amount in case of a low CIBIL score.
Loan against collateral: Personal loan can be borrowed with or without security. If you don’t have a good credit score, you can ask for a loan against collateral. This way, the lender can be sure of getting the money back.
Get your credit report checked: sometimes, there could be an error in the credit report. You should get your credit report checked and updated. Before applying for a personal loan, you should get your credit report updated with the latest information.
Spouse’s CIBIL score: if you have a low credit score, you can show your partner’s score. In this case, your partner should be the combined loan holder, and he/she should have maintained a good CIBIL score.
You can also avail loan by involving a co-applicant or guarantor. The lender can approve the loan if you don’t have a steady income, but the guarantor does.
Conclusion: After reading this blog, you know that you can still apply for a SBI personal loan without compromising with a low-interest rate if you have a bad credit score. You can ask for low principal or involve a guarantor and get your credit report updated before applying for a loan.