When it comes to getting approval for a loan, a good credit score is a crucial factor as it reflects good repayment behaviour in the past and showcases your reliability as a borrower. A credit score is a numeric summary based on your credit history.
While there are multiple credit information companies, TransUnion CIBIL is a popular one. Your CIBIL score is expressed in three digits and ranges between 300 to 900. Lenders typically consider a score ranging from 750 to 900 as excellent.
A good CIBIL score can increase the probability of your loan application getting approved and gives you access to a higher loan amount on affordable terms. A low CIBIL score, on the other hand, can lead to outright rejection of your application or result in a lower loan amount and a higher interest rate.
Some of the factors that can reduce your CIBIL score include:
● Missing EMI payments or defaulting on loans
● Applying for multiple loans at the same time
● Having a high credit utilisation
● Not having experience with different types of credit
● Having a high debt-to-income ratio
However, having a low score does not mean you cannot get credit when needed. Read on for some strategies to get a personal loan with a low credit score.
Analyse your CIBIL report for any discrepancies
Inaccuracies in your credit report can contribute to a lower CIBIL score. For instance, your score may be low if you have paid your loan EMI, but your report hasn’t recorded this transaction. Checking your credit report thus helps you bring such issues to light, which can then boost your score.
Get the assistance of a co-signer or guarantor
If your credit score is low, you can apply for a personal loan along with a co-signer or guarantor. Having one more person involved distributes the burden of repayment and decreases the lending risk for the financial institution you have chosen to borrow from. The likelihood of the lender approving your loan increases if your application is supported by a co-signer or guarantor with a good credit score.
Demonstrate that your income is sufficient to cover EMIs
For lenders, seeing you have the ability to repay the borrowed loan is key to approving your loan application. By demonstrating that you have multiple sources of income that can help you make your monthly payments without fail, you can get a loan even with a credit score that is less than ideal. Apart from your salary slip, you can showcase any income you receive from investments or renting out a property that you own.
Consider a lower loan amount
A larger loan amount as well as a low credit score may result in a rejection. So, if you apply for a lower loan amount, lenders may be more inclined to approve your application since it reduces their risk.
Offer collateral as a guarantee
When you have a low CIBIL score, you can boost your chances of getting credit using collateral as a form of security for the lender. This way, you can even get the loan amount you desire. However, the process of verifying and evaluating collateral can take time, so this option is best when you do not have an urgent need for funds.
As you can see, despite a low credit score, you can still access funds via a personal loan. That being said, work to improve your CIBIL score to ensure you can get affordable financing in the future.
Here are some ways to boost your credit score:
● Refrain from applying for multiple loans at a time
● Pay off existing and outstanding dues
● Make timely repayments
● Borrow different types of credit
● Monitor your credit score regularly
To keep easy track of your credit score and get access to a wide range of financial products, download the Bajaj Markets App. This all-inclusive solution helps you check your credit score for free and compare various personal loans from top lenders all at your fingertips. Download the app today from Google Play or the App Store and take charge of your financial well-being!
