How to Get a Personal Loan on a Low CIBIL Score

A CIBIL score is a three-digit number that gives lenders an idea of the borrower's creditworthiness. It helps them decide whether to approve loan applications. CIBIL scores are calculated using data from all the credit accounts you have opened in the past, such as mortgages, personal loans, and credit cards.

The score is based on an individual's credit history and ranges from 300 to 900. A higher score indicates a better ability to pay back loans and manage debt, while a lower score may indicate the opposite. It's less likely for your loan application to get rejected with a low CIBIL score; however, there are some ways you can still get one approved.

Today we'll discuss five ways to get a personal loan with a low CIBIL score.

1. Check Your CIBIL Report for Any Faults

Sometimes your CIBIL report can hold errors, which can be among the reasons for a low CIBIL score. Hence, it's essential to keep checking your report at least annually to spot any mistakes immediately. And once you spot the error, it's easy to get an authority involved and ask them to rectify it.

2. Apply from an NBFC

Non-Banking Financial Companies (NBFCs) are bank-like institutions that carry bank-like financial services, but they do not hold banking licenses, so they are technically not qualified to be a bank. But such companies can lend an instant personal loan for a low CIBIL score, keeping other factors in mind. Why it's better to do so? If you need funds urgently and approach a bank, they will check your CIBIL score, which can cause hard inquiries on your report. Hard inquiries will further lower your CIBIL score.

NBFCs have lighter policies when lending funds to borrowers with a low CIBIL score; however, they will charge more interest rates than traditional banks.

3. Apply for a Small Personal Loan

If you have a low CIBIL score, the chances of you being rejected are higher for a larger loan amount. The lender might consider you a risky borrower. But to get into their good books, you can consider taking a small loan instead and increasing your credit score by repaying it on time. This will earn you creditworthiness and the lender's trust so you can come back and get a higher loan amount.

4. Share Proof of Income to Gain Trust

Some FinTech companies in the market, along with checking your CIBIL score, also look for other factors that can prove your creditworthiness, like your income. If you have a low CIBIL score and want to borrow a loan, showing your income proof, like your bank statement, can prove to be beneficial, especially if you've recently gotten a good hike in your salary, have additional income sources, or have a significant annual bonus. This shows that you're financially sound enough to repay the loan, gaining quicker approval from the lender.

5. Get a Guarantor or Co-applicant

People with no credit history or even a low credit score can still get a personal loan approved if they get a guarantor or a co-applicant. Moreover, if the guarantor you are applying with has an excellent credit score and credit history, your chances of sealing a better deal with a higher loan amount with the lender increases. But make sure you have the necessary KYC documents and completed permissions in order to have a successful loan application.

Focus on Improving Your CIBIL Score

Your CIBIL score is going to prove your creditworthiness to a lender. It's a report that shows the lender whether they can trust you or not, proof that your credit history is safe to trust you with their funds. If you want to get a loan approved, it's vital to have a good CIBIL score. While you may get a personal loan even with a low score, it's a good practice to keep improving your CIBIL score for the next time you want a loan.

​# This is a guest article authored by Kreditbee. For any enquiries or details, you can visit the author's website.