Credit score plays a crucial role in the loan approval process. Lending institutions assess the creditworthiness of borrowers through their CIBIL ratings, and individuals with a score of 750 or higher stand a chance to get easy approval compared to others.
Nonetheless, individuals can still secure a loan deal of their choice with a low CIBIL score by employing a few tips.
How to get an instant loan for a low CIBIL score?
As stated above, credit score plays an important part in determining the loan eligibility of an individual, and it is applicable across secured and unsecured loans. Nevertheless, one can manage to get a credit with a low or poor credit score by following the below-mentioned strategies –
- Apply for a low amount
Individuals applying for a big-ticket loan with a low credit score might end up facing rejection. This is because the lender would consider them as high-risk borrowers who can default. The reason is, a low CIBIL rating reflects that individual as an unreliable borrower.
Alternatively, if the loan amount is low, the lender might grant the loan application. Moreover, it would be easier for the customers to repay their loan amount more conveniently, thereby helping them to improve their CIBIL scores in the long run.
- Show the proof of income
Borrowers with low CIBIL ratings can increase their chances of loan approval by providing evidence of income. Lenders often prefer applicants with a stable source of income as they are less likely to default on repayments. So, make sure to provide supportive documents required during your personal loan application to show your income.
Individuals can also disclose their additional source of income, such as income from rent, fixed funds, investments and more. This will make the borrowers eligible for a loan even with a poor credit score.
Moreover, a point to remember here is that the income parameter set by lenders is not uniform. They vary from one financier to another; thus, one needs to meet lender-specific criteria to increase their chances of approval.
- Opt for secured loans
A high CIBIL score is crucial for securing unsecured credits. However, individuals with lower credit ratings can choose to apply for a secured loan where they will need to put collateral to avail funds against it. Since lenders have the guarantee of collateral, in such cases, one can avail a credit with a comparatively low credit score.
- Avail a joint loan
Consumers with a low CIBIL rating can get easy and hassle-free loan approval with a co-applicant for the loan. Availing of a loan with a friend or family member with a high credit score can significantly improve the chances of loan approval.
Moreover, having a guarantor with a high credit score can also help borrowers secure a loan effortlessly.
- Stay updated with the credit report
Credit reports of customers are updated and maintained by TransUnion CIBIL and various other credit rating agencies. However, errors, discrepancies, or misreporting can affect one’s credit report, thereby lowering their CIBIL scores. This can cause unwanted inconvenience while applying for credit.
Hence, it is essential to check the CIBIL score for free regularly to keep track of its movement. One can also raise a dispute to resolve errors on this report and better their credit score and chances of securing credit. This can be done both offline as well as online through the official website of CIBIL.
Besides knowing how to secure a loan with a CIBIL score, one should also focus on improving it to avoid any hassle during loan application.
5 tips to better CIBIL score
Here are some tips on improving the credit score –
- Paying the dues on time includes EMIs and credit card bills
- Maintaining a lower credit utilisation ratio, preferably under 30%
- Refrain from making multiple credit applications at once
- Keep old accounts open
- Debt consolidation always helps
Although it is not impossible to get an instant loan with a low credit rating, it is important to maintain a healthy CIBIL score. A low CIBIL rating can lead to several unwanted hassles during loan applications. Borrowers should focus on improving their CIBIL scores to enjoy smooth loan approval and attractive loan features and benefits.