When you apply for a personal loan, the first thing most lenders do is run your credit report. Your credit score is based on your credit history, the amount of credit you’ve taken out, and your ability to repay debts, among other factors. Because personal loans are unsecured loans with no collateral, lenders will use your credit score to decide if lending to you is a dangerous venture.
While it is a common misconception that persons with low CIBIL scores cannot obtain a personal loan, the fact is that many lenders provide personal loans to those with poor credit.
The following are a few of them:
What is the meaning of a CIBIL Score?
Your CIBIL (Credit Information Bureau Limited) score is how banks and other financial organizations determine your creditworthiness. It’s a personal identification number that notifies the bank how responsible you are with your loans and credit cards. The CIBIL score is one of the most important factors in determining whether or not a loan will be approved. The CIBIL score was India’s first credit rating system, and it is recognized by all banks as a reliable source of information about a person’s credit rating.
What is the purpose of the CIBIL Score?
The CIBIL score system works in a similar way to credit score systems in many other nations. A number between 300 and 900 is issued to you as a score. The number you receive is based on information provided by the banks to CIBIL. This data is a compilation of your personal loan, house loan, auto loan, and credit card repayments. If you make all of your payments on time, you should expect to have an excellent credit score.
If you miss payments or do not repay your credit card on time, your credit rating will suffer, making it more difficult for you to obtain credit in the future. Utility bill payments will be included in CIBIL, which means that depending on when you pay your phone, power, or water bills, your score may improve or decrease.
How CIBIL ratings affect loan eligibility
While banks may not tell you what CIBIL score qualifies you for a personal loan, they do state that your credit score will be considered when your loan application is approved. If your credit score falls below a specific threshold, you may be turned down for a loan.
Even if you are accepted, the interest rates you are given may be greater than someone with a strong credit score. While most Indian banks are hesitant to lend to people with bad credit, there are private financing organizations that may give personal loans to those with low CIBIL scores.
When you have a poor CIBIL score, how can you secure a personal loan?
It will be difficult to obtain a personal loan if you have a bad credit score as evidenced by your low CIBIL Score. It is not, however, impossible. Despite your low credit score, many lenders will be willing to lend to you, however at a somewhat higher interest rate.
Many fintech platforms and NBFCs now provide personal loans to those with bad credit, and a few of them are included below:
- Sudhaar Finance Credit
- Finance from the past
- Credit at Home
If your credit score is between 600 and 750, you can apply for a personal loan at a bank or financial institution. However, because your credit score is neither excellent nor terrible, lenders may be wary of you and may do further credit checks before approving a loan. They could also charge you a higher interest rate. Lenders will be more likely to approve your loan request if you have a strong CIBIL score. If you have a decent credit score, you may work out a deal with the lenders on interest rates, processing fees, and other terms. You could even be able to acquire pre-approved offers that allow you to get a personal loan right now with minimum paperwork.