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  5. How to Get Personal Loan with Low CIBIL Score?

How to Get Personal Loan with Low CIBIL Score?

Personal Loans are perfect for those who need additional money to meet personal expenses. But how can you get personal loan with low CIBIL score?

  • Updated On: November 19, 2024
  • 8 min, Read

Table of Contents:

  • What is credit rating and CIBIL Score?
  • What is bad and a good CIBIL score for a personal loan?
  • How can I get personal loan with a low CIBIL score?
  • Steps and tips to improve your CIBIL score

Want to apply for a personal loan but struggling with a low CIBIL score of less than 600? Well, getting a personal loan with a low CIBIL score of <600 can be problematic. A score this low is considered poor for availing credit and makes banks and financial institutions doubtful about your creditworthiness and ability to pay back the loan in time. You may need to explore more options of lenders, deposit a collateral, or even work on improving your credit rating before applying for any loans.

When you are in dire need for additional funds to meet personal expenses, planned or unplanned, personal loans offer a convenient option to borrowers looking for additional money to meet these financial needs. These loans come with no restrictions on the usage of the funds borrowed, meaning they can be used for many purposes such as holidays, medical expenses, higher education funding, wedding expenses etc. 

However, getting approval for a personal loan needs borrowers to fulfil various eligibility criteria. The applicant’s CIBIL score plays a pivotal role in determining the eligibility to get personal loan. A CIBIL score is a three-digit number that summarises your credit rating based on the credit history and helps the lending financial institution in assessing your creditworthiness and how likely you are to pay off the money you borrow form the bank. There are no specific categories of personal loans that borrowers with low CIBIL score can apply for. So, if you have a low credit score, then it can be tougher to get a loan. However, there are ways to heighten your chances of getting a personal loan approval with certain renowned Bank. In this article, we will explore how you can get a personal loan with a low CIBIL score and what you can do to improve on it.

What is credit rating and CIBIL Score?

Credit rating is a number that reflects your creditworthiness and ability to pay back the loans to the bank in a timely manner. Usually, in India we assess that through CIBIL score that ranges between 300 and 900. The higher your CIBIL score, the better are your chances to get a loan approved from the bank at relatively lower interest rates. Hence, a low CIBIL score adversely affects your eligibility to get a personal loan. For instance, a score of 750 or above is generally considered good, while a score below 600 is considered poor. 

All legally eligible lending organisations use your CIBIL score to determine whether hands and you will repay it on time. If your CIBIL score is low, most the financial lenders may vacillate to approve your loan application. Even if they approve your personal loan for the required amount, they are more likely to charge you a higher interest rate compared to those with a better CIBIL score. So, whether you are planning to apply for a loan right away or may need it in future, it is always a good idea to try and improve your CIBIL score instead of applying for a loan with a low credit score.

What is bad and a good CIBIL score for a personal loan?

You must be wondering what defines a good or a bad credit score. Well, going by the usual norm, above 750 is considered as a very good score and offers extremely high chances of approval. 700-749 is good with high chances to get approved, while 650-699 is kind of satisfactory and a loan approval may be possible. However, 600-649 is bad score and less than 600 is very badand has extremely low to chance of getting a loan approved.

How can I get personal loan with a low CIBIL score?

Now the most important question, can you still get a personal loan with a low CIBIL score? If yes, how? Here are a few tips:

1. Stable income -

Display a stable source of income to show your eligibility to repay loans.

2. Low debt-to-income ratio -

Maintaining a low debt-to-income ratio can improve your chances considerably.

3. Co-applicant with a high CIBIL -

Try applying for the loan with a co-applicant who has a good credit score to increase your chances of loan approval.

4. Additional documentation –

Some extra documentation can intensify your application to some banks.

Steps and tips to improve your CIBIL score

Getting a personal loan with a low CIBIL score may be challenging. But if you can improve your CIBIL score, it will be helpful in securing a personal loan. Here are some tips to boost your creditworthiness:

1. Check your credit report-

Start by obtaining a copy of your credit report from the credit bureau or CIBIL website online. Do report back if there are any discrepancies that you may observe.

2. Timely payments-

If you continue to pay your existing dues like credit card bills, EMIs, etc. on time, you will be able to boost your credit score considerably.

3. Low credit utilisation-

Keep your credit card balance less than 30% of your credit limit. High credit utilisation will impact your credit score adversely.

4. Credit diversification-

A healthy assortment of secured and unsecured loans can positively impact your score. For instance, a mix of credit cards, long or short-term loan, etc.

5. Avoid frequent credit applications-

Keep in check the number of credit applications that you make. Frequent inquiries for credit or loans indicate financial distress and can worsen your credit score.

6. Old credit accounts-

Keeping existing and old credit accounts active can contribute positively to your credit history by showing your capability to manage credit well.

7. Monitoring credit score-

Make sure that you keep checking your credit rating and act if you find any discrepancies.

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