How to Get a Personal Loan with Low Credit Score?

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. 

If you see a product online with a 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, with a score above 750 considered good. If your credit score is low, loan companies would be reluctant to lend you money. 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 with bad CIBIL scores, and thus, they have tailored products to cater to this segment, albeit often 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. 

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.

Factors

Weightage

Repayment History

30%

Credit Utilization

25%

Types of credit & duration

25%

Other Factors

20%

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 are for bad credit score intended to help people with low credit ratings 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 people with bad credit. 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.

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 loan without CIBIL.

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 credit.

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?

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.

Frequently Asked Question

Can I Get A Personal Loan If My Cibil Score Is Low?

While you might find lenders willing to offer you a personal loan with a low CIBIL score, the interest rate charged on them will be higher.

Having a high CIBIL score means you can borrow a high loan amount at a lower interest rate. And you also get quicker loan approvals and disbursals.

Is 550 A Good Cibil Score?

No, 550 is not considered a good CIBIL score among most lenders. Anything above 750 is considered a good CIBIL score.
Refer to this table below to know whether your CIBIL score is good or bad:

 

CIBIL Score Range

Rating

300-500

Poor

550-650

Average

650-750

Good

750-900

Excellent

Can I Get A Loan With A 520 Credit Score?

You may find it difficult to get a personal loan with a 520 credit score. But even if you find a lender willing to give you a loan at this score, you may have to pay a high interest on the same.

What Is Considered A Low Credit Score When Applying For A Personal Loan?

Anything less than 600 is considered as a low credit score when applying for a personal loan. 

What Are The Options For Obtaining A Personal Loan With A Low Credit Score?

Need personal loan with bad cibil score? You can consider these options: 

  • Apply with a guarantor. 
  • Provide your income proof
  • Opt for secure personal loan
  • Apply for a small loan amount
What Should I Watch Out For When Getting A Personal Loan With A Low Credit Score?

The first thing that you should watch out for when getting a personal loan with a low credit score is your budget. While taking a personal loan and repaying them on time can help you improve your credit score, not having a budget in place can lead to missed payments. Other than that, make sure you compare loan offers across various lenders and check the additional charges associated with borrowing. 

How Can I Avoid Scams When Looking For A Personal Loan With A Low Credit Score?

Choose a trustworthy lender that has a legitimate online presence and follows all the regulatory requirements of the RBI. Go through their website and check reviews before you even start your application. 

What Documents Do I Need To Apply For A Personal Loan With A Low Credit Score?

While the documents required can look different among lenders, these are some common documents you may need: 

  • PAN card
  • Aadhaar card
  • Income proof

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