How to Get a Personal Loan with Low Credit Score?

If you see a product online with low rating and poor reviews, you wouldn’t feel like buying it, right? Similarly, a lender would be reluctant to give you a loan if you have a low credit score. 

Your credit score reflects how trustworthy you are as a borrower. It usually ranges from 300-900. Credit score above 750 is considered a good credit score. If your credit score is low, loan companies would be reluctant to lend you money and even if they decide to lend you money, they will charge you a higher interest rate as you would be considered a risky borrower. 

For those who need a personal loan with a bad CIBIL score, it can be challenging but not impossible. Financial institutions are aware that many individuals need personal loans for bad credit scores, and thus, they have tailored products to cater to this segment, though at higher interest rates.

Your Credit Score Could be Low Due to the Following Reasons – 

1. You applied for a credit card or personal loan with multiple lenders at the same time. 

2. You maxed out your credit card or utilized a large portion of your available limit. 

3. There was an error from the credit bureau’s end or your credit information was incorrectly reported.

4. You defaulted on a loan or credit card payment or paid after the due date. 

5. You are new to credit and don’t have a credit history. 

6. You applied for a credit card or a loan and got rejected by few certain reasons. 

Why Is CIBIL Score Important?

CIBIL score helps you to improve your creditworthiness when applying for a personal loan. The approval of your loan is largely dependent on your CIBIL score. Lenders rely on this score and assess the risk of lending money to you. A high CIBIL score may help you secure a good loan deal with better interest rates and quick loan approvals.

If you have a low CIBIL score or no score at all, there are personal loan options without a CIBIL check. Few lenders offer personal loans for low CIBIL scores or even personal loans without a CIBIL score. These loans come with higher interest rates or much stricter terms. These are the best options for someone who is seeking personal loans with a low credit score.

Factors that Affect Your CIBIL Score

The 3-digit CIBIL score is not just about your payment history. It also depends on the other factors below.

The other factors that can impact your CIBIL score are the number of credit enquiries you make, credit utilization, credit mix, etc.

How CIBIL Scores Affect Eligibility for Personal loans?

Your CIBIL score is more than just a 3-digit number. It’s a reflection of your borrowing habits based on which you can get approved for a loan. When you apply for a personal loan, one of the first things that your lender will check is this score. 

A good CIBIL score of 750 or above shows you’re a responsible borrower with a clean repayment history and strong credit profile. And having a track record of paying all your EMIs on time increases the trust in your potential lender. 

This automatically increases your loan eligibility which can help you get high value loans at low interest rates. But that’s not all. You also get other benefits like instant approval, quick disbursal and flexible repayment options, giving you an unmatched loan experience. 

Mistakes to Avoid When Applying for a Personal Loan with Low Credit Score 

If you’re someone who has a low credit score, taking a personal loan and repaying your EMIs on time can help you build your score. 

But before you even start your loan application, make sure you avoid these mistakes:

1. Not Creating a Budget

While a personal loan can be a great way to build your credit score, not keeping a budget in place can backfire your plan. Make sure you carefully assess your financial goals and requirements to create a budget and then only choose a lender. 

2. Not Comparing Loan Offers Across Various Lenders

Make sure you compare offers across various lenders to get the best terms of borrowing. Using an EMI calculator can make this process easier. All you need to do is enter the offered loan amount, interest rate and tenure to find out what your monthly payment looks like. 

3. Choosing a Tenure That Doesn’t Fit Your Budget

Your loan tenure is nothing but the life of your loan. When choosing your repayment plan, make sure it fits your budget so you don’t feel burdened in any way. 

Also Read: The Dos and Don’ts of Personal Finance Planning 

Top Features and Benefits of Personal Loan for Low CIBIL Score

It’s no longer difficult to get a personal loan with a poor CIBIL score. Today, a large number of financial organizations focus only on serving borrowers with low credit scores by providing personal loans without CIBIL. These personal loans for low CIBIL score intended to help people with bad CIBIL score get the money they need by offering financial support.

Flexible Loan Amount

You can choose the loan amount that best fits your needs with personal loans for bad credit for people. Lenders offering personal loans without a CIBIL score are ready to meet a range of financial needs, so you can easily manage your money whether you need a small amount for an emergency or a larger amount for a major expense.

Quick Eligibility Check

One of the key advantages of personal loans with low credit scores is the quick eligibility check. Lenders understand the urgency of financial needs and streamline the application process to determine your eligibility swiftly. This ensures that even if you need a personal loan with a bad CIBIL score, you can receive prompt approval and access the necessary funds without prolonged waiting periods.

Collateral Free Loans

Generally speaking, unsecured personal loans without a CIBIL score don’t require collateral to be granted. For those who might not have any valuable assets to pledge and have a low credit score, this option is helpful. Everyone can receive financial aid through collateral-free loans without having to jeopardize their own belongings.

Affordable Interest Rates

Low-interest personal loans are still available for borrowers with poor credit. While the rates might be slightly higher than those for individuals with excellent credit scores, lenders are increasingly offering competitive rates to attract borrowers with low CIBIL scores. This makes it possible to obtain a personal loan without CIBIL at reasonable costs, ensuring that repayment is manageable.

What Should not do When You Applying for a Personal Loan with a Bad Credit Score? 

When you need a personal loan with a bad cibil score, it is important to go through the lender’s needs to get quick loan approval and get favourable loan terms. Some of the key actions that you can take while applying for a personal loan for a low cibil score are as follows: 

Show your Stable Income:  Stable income for lenders is an important factor that demonstrates that you can pay EMIs on time and this could be through your employment history or bank statements.

Loan Application with a Co-Applicant: If you need a personal loan with a low bad credit score, try applying for a personal loan application with a co-applicant who has a good repayment history and a better credit score. A co-applicant can help you with security and help lenders have more faith in you for repayment of the loan taken. This is a good strategy to increase your chances of getting approved for a loan even with a bad credit score. 

Apply for a Lower Personal Loan: It’s better to ask for a lower personal loan if you have a lower CIBIL score. For quick approval, smaller amounts will be beneficial and easy to manage. This increases your chances of getting a loan approved. 

Additional Documents: To increase your chance of loan approval, try submitting additional documents that strengthen your loan application. Submit documents like proof of assets, or copies of income tax returns, etc.

5 Ways to Get a Personal Loan with Low Credit Score

1. Apply for a Loan with a Co-Applicant 

When you apply for a personal loan with a co-applicant, both of your credit history would be taken into account while considering the loan approval and both of you would be responsible for repaying the personal loan.  

So, if your co-applicant has a steady source of income and a good credit score, your probability for loan approval will increase. 

2. Add a Guarantor to Your Loan 

Adding a guarantor increases the chances of getting a personal loan with low credit score as the guarantor provides an additional layer of security to the loan company. 

Unlike applying with a co-applicant, here the borrower would be responsible to repay the loan. The guarantor would be legally obligated to pay only if the borrower fails to pay the EMIs.   

3. Pledge Collateral Against Your Loan 

Usually, personal loans are unsecured loans which means that you can take them without submitting any asset as security.   

However, if you have a low credit score and are unable to get a personal loan, you can give some form of security to the loan company which can significantly increase your chances of loan approval.  

One of the most common types of personal loan is loan against property.

Here, you can get a loan of higher amount by submitting documents of your property as a collateral. The loan company will keep the documents with themselves until you pay off the loan. In case you fail to repay your personal loan, the lender will have the right to auction off your property to recover the loan amount. 

4. Peer-to-Peer Lending 

Also popularly known as P2P lending, here you can borrow money through online services that work as an intermediary between lenders and borrowers.  

P2P portals are majorly used by people with low income or poor credit score. Here, the borrower and the lender have the convenience of directly negotiating with each other. This method requires minimal documentation and the loans are unsecured in nature. 

5. Check Your Credit Report for Errors 

There are many instances when loan companies make an error when reporting your credit details to the bureau. There could also be an error on the bureau’s end. Therefore, it is necessary to regularly check your credit report, especially if you have a low credit score. 

If you identify any error, like incorrect personal information, error in payment status, outdated information, etc. You should file a dispute online on the bureau’s website and get the error rectified.  

Best Ways to Get Personal Loan Without Cibil Score? 

If you’re someone who doesn’t have any credit history, there are many lenders easily available in the market who can give you the funds you need.  

Here are some ways in which you can increase your chances of getting a personal loans for bad credit score.

Apply for a Small Loan Amount:

Requesting a small personal loan amount reduces the lender’s risk of giving you a loan. This way, you can increase your chances of getting approved. 

Provide Your Income Proof:

While lenders go through your CIBIL score to calculate your loan eligibility, they even consider other factors like your employment status and monthly income. Providing any kind of income proof like your salary slips or bank statement can help you get approved for a loan.

Apply for a Secured Loan:

A secured loan is when you provide any asset like gold, jewellery, shares, etc. as security against the money you borrow. Opting for a secured loan is one of the best ways to get a personal loan without CIBIL score as it reduces your lender’s risk of providing you loan. 

Download the Zype App! : 

Want a personal loan without CIBIL score? Look no further because Zype provides instant personal loans of up to Rs. 5 lakhs even to those people who are new to credit. All you need is a valid PAN and a minimum monthly salary of Rs. 15000 to apply for a loan. 

5 Tips to Increase Your Credit Score 

The moment you get to know that you have a low credit score, start with these steps – 

1. Pay your EMI and credit card bills on time. 

2. Don’t take too much debt at the same time. 

3. Review your credit reports regularly. 

4. Never apply for multiple loans and credit cards at the same time. 

5. Keep your credit card utilization below 30% of your available credit limit.  

Also Read: How to Improve Cibil Score?

Request The Lender To Consider “NA” Or “NH” On Your Credit Report

The “NA” (Not Available) or “NH” (No History) indicates that the person has no credit history or hasn’t used any credit for a long time. This can cause a problem in securing a personal loan. However, you can request a loan with the help of other factors such as income stability, or assets you have instead of just a CIBIL score.

Some lenders still offer personal loans without CIBIL scores and specialize in providing personal loans for low CIBIL scores or people with no credit history. If you have low credit score,  there are options you can explore. Many lenders offer personal loans with low credit scores, even if your report isn’t perfect.

In Conclusion 

It is difficult to get a personal loan with low credit score but as we saw in this blog, there are ways to navigate this problem. However, it is extremely important to have a healthy credit score and you should actively work towards achieving the same.