CIBIL or a Credit Score is a key requisite to avail a loan either from Bank or a NBFC as it gives them a clear picture to the lender on your repayment credibility if they offer you a loan in future. It also gives lenders a look into your credit usage and regular monitoring of credit score.
High credit score also sometimes ensure that you get a loan at a relatively lower rate of interest. On the other hand, low CIBIL score indicates poor creditworthiness of the borrower and reduces your chances of getting a loan.
In order to improve your credit score, it is advisable to pay your bills on time. Lenders while reviewing your credit report will see how reliably you pay your bills. Pay your bills on time as late payments not only attracts penalties but also affects your credit score. Also, set up automatic payments or monthly reminders if you forget to pay your bills. However, there are some ways through which one can try getting a loan even if their credit score is low.
1. Applying for loan at an NBFC
Instead of applying at a bank, a customer with a weak CIBIL score can apply at NBFCs for loans as the likelihood of getting the loan approved is high there since NBFCs have relaxed policies towards customers with low credit scores. Before applying for a loan, one must know that each loan application evaluation is backed by the credit report examination which often results into hard inquiries.
If your CIBIL score is low, applying to an NBFC is better. However, an important thing to note here is that the interest rates charged by NBFCs are usually higher than what is offered by banks.
2. Secured loan
There are some banks and financial institutions which approve loans of people with even low credit scores provided they apply for a mortgage-backed loan meaning a secured loan. Those with low credit score in urgent need of funds can consider options like a gold loan, loan against property or loan against securities, where credit score has a relatively lesser impact. In this case, loans are generally accepted by lenders as collateral to disburse a secured loan.
3. Joint loan
Those with a low CIBIL score can add their spouse or another family member who has a decent credit history as a co-borrower or guarantor which may increase the chance of getting a loan at a competitive rate.
4. Small loan
Since a lender feels reluctant to offer a huge loan to an individual with a low credit score, one can try taking a small loan so that it’s easy to repay. This will strengthen creditworthiness in the process. Once their credit score improves and their credit history is better, they can opt for a bigger loan from a bank or any other financial institution.
Note that your credit score may get affected due to a number of factors like missing the deadlines, mismanaged credit cycle and much more. A high credit score ensures your loan request is approved and the money is disbursed quickly.