Low CIBIL Score Personal Loans: Insider Tips from Financial Advisors

When you apply for a Personal Loan, the lending institution evaluates your CIBIL score during the review process. With a high CIBIL score, you can even obtain a Personal Loan without income proof. However, you may have a hard time obtaining a low CIBIL score Personal Loan. Loan providers evaluate your creditworthiness based on this 3-digit number. Based on that, they make their lending decision, loan amount, interest rate, and other terms and conditions before giving you approval.
Since a Personal Loan is unsecured, loan companies only want to lend to applicants with a decent credit history. However, that does not mean you cannot obtain a Personal Loan with a low CIBIL score. Below, we will share some insider tips from financial advisors to make that happen.

What is the CIBIL Score?

Loan providers conduct a CIBIL check to determine your loan eligibility without collateral. A CIBIL score is a 3-digit number that represents your creditworthiness based on your past credit behaviour. Credit Information Bureau (India) Ltd, CIBIL, manages this rating system by collecting data from financial institutions. The higher the CIBIL score, the better your chances of repaying the loan on time. A low CIBIL score indicates a high default risk and can make the chances of approval dicey. 

What Does the CIBIL Score Indicate?

To understand what the CIBIL score indicates, you must look at the CIBIL score ranges. Here is a list of score ranges and their implications:

The unsecured nature of Personal Loans presents a higher risk for loan providers. A good credit rating indicates low chances of default. However, that does not mean you cannot obtain a loan without a good CIBIL score. You can still get a low CIBIL score Personal Loan but with some extra formalities and higher interest rates. 

Insider Tips to Obtain a Low CIBIL Score Personal Loan 

Are you looking for a Personal Loan but have a low CIBIL score? Here is how to obtain one:

• Show Sufficient Income Proof to Manage Prompt Loan Repayment 

Showing a sufficient income source can significantly improve your chances of obtaining a low CIBIL score Personal Loan. If you have recently found a new income source or received an increment, you may highlight your improved financial strength to convince the lenders. You might have had a bad credit history due to low income. But now that your income has increased, you may handle the EMIs more responsibly. After verifying your proof of income, the loan company may feel convinced to approve your loan.

If you have a low credit score, applying for a smaller loan may work in your favour. Smaller loan means easily manageable EMIs. Requesting a lower sum will minimise the lender’s risk exposure. The lower risk may convince the loan provider to approve your loan. However, they may charge a higher interest rate to take the risk. 

Involving a co-applicant with a decent CIBIL score will boost your eligibility for a low CIBIL score Personal Loan. The co-applicant’s credibility will give the lender a sense of security. However, the co-applicant will be responsible for loan repayment if you default.
Identify Errors in Your Credit Report
Regularly checking your credit report is important. It might contain errors regarding your identity, repayments, and financial information. If you identify any such error, bring it to the credit bureau’s attention immediately. They will verify the authenticity of your claim and rectify the mistake. Once that is done, your CIBIL score will see an instant boost, and your loan eligibility will increase. 

• Request the Loan Provider to Consider NA or NH on Your Credit Report

If you see NA (not applicable) or NH (no history) in your credit report, it means you have had limited or no credit-related activity over the last few years. In such a situation, contact your loan provider and request that they consider the NA or NH in your credit report. They may approve your loan application but at a higher interest rate.

Ways to Improve Your Credit Score

As evident, your credit score directly impacts your loan approval. If your credit rating is low for any reason in the past, try these ways to improve it:
Make Timely Payments: Paying your dues in full and on time is extremely important. Besides boosting your credit score, timely repayment will also avoid high interest on missed or late payments. Setting reminders and switching to automatic payments ensure prompt payment of dues.
Clear Outstanding Balances: First, develop a clear strategy for paying off high-interest loans and credit card dues. Approach your finance company for loan repayment options. Consider loan settlement options for some outstanding loans. Your CIBIL score may take a temporary hit, but it gives you an opportunity to start afresh.
Borrow a Personal Loan: Borrowing a small Loan and repaying its EMIs on time can help improve your credit score. The lender may approve the loan quickly if you apply for a small loan and show proof of income to support EMI repayments. Moreover, repaying a small loan will be easy on your finances. Your credit score will improve with the timely Personal Loan repayment.
Diversify Your Credit Mix: If you have several loans in your credit profile, you must maintain a diverse mix of secured and unsecured loans. Rebalance your credit portfolio to improve your CIBIL score.
You must know that your CIBIL score fluctuates based on your latest credit activities. You may work on improving the score before applying for a Personal Loan. However, if you need money urgently, use the insider tips mentioned above to obtain a low CIBIL score Personal Loan. The interest rates may be higher, but you get funds to cover expenses and improve your credit score with timely repayment.