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How to Get a Personal Loan Despite a Low CIBIL Score?

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A Personal Loan is an unsecured loan that can be availed during financial emergencies. Banks, non-banking financial companies (NBFCs) and other financial institutions offer Personal Loans after evaluating your CIBIL score. To comprehend how this functions, you first need to know about CIBIL and its connection to the HDFC Personal Loan or any other Personal Loan application.

What is CIBIL score and why is it vital for a Personal Loan?

CIBIL (Credit Information Bureau, India Limited) provides a credit score to every individual and business. This score is one of the most important factors when lenders evaluate the eligibility of an individual for any type of loan including a Personal Loan.

This credit score is a three-digit number, from 300 to 900, which shows your complete credit history based on the information provided by banks and other financial institutions every month.

A score of less than 700 is considered a low CIBIL score. Banks usually do not approve Personal Loans of individuals with a poor CIBIL score. Even if they do, they charge a very high rate of interest.

CIBIL score depends upon the repayment of your Personal Loan, Home Loan, Vehicle Loan, or any other loan and your Credit Cards payments. In case you are dedicated and regular in your loans and Credit Cards repayments, it will result in having an excellent CIBIL score of 850 and above. On the other hand, any default in EMIs and Credit Card bills will have a drastic impact on your overall CIBIL score.

A Personal Loan is a loan obtained to manage personal financial needs like vacation, marriage, education, medical emergency, and so on. Thus, to approve a Personal Loan, lenders comprehensively check if the candidate is capable enough to repay the loan in a timely manner or not. For example, if you Apply for HDFC Personal Loan, the bank will check your entire credit history and only then issue you a loan. As there is no security or collateral available with the lender, it is imperative for them to assess the previous history of the candidate in terms of credit reimbursement. And this can only be done by analyzing your CIBIL score.

What are the reasons for having a low CIBIL score?   

The following are the reasons that result in having a low CIBIL score:

  • Having multiple loans under your name
  • High consumption of your Credit Card limits
  • Late payment or missing the EMI of your loan or delayed Credit Card bills.
  • A higher ratio of unsecured loans
  • Getting no credit at all
  • Lots of prohibited loans or Credit Card requests

How to obtain a Personal Loan with a low CIBIL score?

A bad CIBIL score (below 700) may lower your possibilities to obtain a Personal Loan approved but still, there are other choices which you can explore in order to get the required funds to meet your immediate financial needs.

Here are some of the alternatives, which might assist to procure a Personal Loan despite a low CIBIL score:

  1. Collateral-based loan: In the event, if your Personal Loan application does not get approved, you can try to obtain a secured loan by pledging collateral like gold, property, fixed deposits, and so on. Many lenders offer loan against gold and Loan Against Property at highly affordable interest rates to cater to your financial needs.
  2. Check if your company offers loan to their employees: Many reputed organizations offer Personal Loans to their employees at zero or very low interest rate. If you are working with a renowned company, you must check if your employer offers this facility or not.
  3. Apply at the bank where you hold a savings account or salary account: If you are an old customer of your salary/savings account banker, you may Get a Personal Loan Approval by that lender even if you have a low CIBIL score. However, this facility may come at high interest rate.
  4. Taking a loan from your family members or friends: If you have any relative or a friend who can lend you money, you can get funds from them. These loans can be well organized if backed by a legal loan agreement. Also, you may get these loans at zero or very low interest rate.
  5. Taking the help of co-applicant: Do you have a spouse, a family member or a friend who has a good income source and an excellent CIBIL score? If yes, you can co-apply for a Personal Loan with them to get easy approval for your loan. The lender adds the income and CIBIL scores of both the applicants to analyse your loan eligibility.

Even though having a good CIBIL score is mandatory for procuring a Personal Loan, the alternatives mentioned above can be helpful in case you lack a reliable score.

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