Personal loans are one of the popular modes of short-term financing in the Indian financial market. These types of unsecured credits are excellent to mitigate emergency monetary requirements because they offer substantial loan amounts at attractive interest rates and several borrower-friendly features and benefits.
However, most financial institutions consider multiple factors like age, income, monthly expenses and most importantly your credit score before approving the loan application. Although most lenders look for an applicant with a high credit score only, you can avail personal loan with bad CIBIL in certain situations.
Loan for people with poor credit score
Your credit score helps gauge your creditworthiness and repayment capability. These ratings are allocated by companies like CIBIL, Equifax India, Experian India, etc., and generally represented in a range between 300 and 900.
Poor credit scores make a borrower a high-risk proposition for financial institutions. Lenders often reject applications to such individuals to stay away from defaults. However, you can apply and avail a personal loan without CIBIL score or with poor credit rating by following these procedures.
- Apply from an NBFC – Non-Banking Financial Companies (NBFCs) often provide credits at much lenient eligibility criteria. You can apply and avail a personal loan even if you have a poor credit score as such financial institutions emphasise on several other aspects like FOIR, existing line of credit, income, etc.
- Provide evidence of repayment capability – You can also provide evidence of your repayment capability to avail a personal loan for bad CIBIL score. Supporting documents like bank statements, employment certificate that shows you have a steady job with secured monthly income at a reputed organisation, employment tenor, etc. reflect that you have repayment capability even with a bad credit score. Financial institutions will be more likely to offer you a personal loan if you are able to successfully provide such necessary documentation straight up.
- Apply for a lower loan amount – Applying for a lower loan amount will reduce the risks associated with the credit. You are more likely to repay a smaller amount without facing any financial difficulty. The improved chances of repayment make a lender feel more comfortable granting a personal loan without CIBIL check to you.
You can use personal loan EMI calculator to decide the minimum amount you comfortably repay within a given tenor. It will help you avail credit even if you have a poor credit score.
- Apply with a guarantor – You can apply for credit along with a guarantor or co-signer if you have a bad CIBIL score. A co-signer with a higher credit rating can act as a guarantee against credit, and there is a higher chance that a lender will approve an unsecured loan for bad credit. However, late repayments or defaulting on the credit will affect both yours and the co-applicants credit rating, so you should carefully consider your repayment plans before applying with a co-signer.
- Consider case with NA or NH – If you do not have any previous credit history or have to borrow any amount for the last 36 months, your credit report may reflect as ‘Not Available’ or ‘No History.’ In such scenarios, it is possible to avail a personal loan at a slightly higher interest rate.
These are some of the most effective methods to avail a personal loan even when you have a bad CIBIL score. Ensure you have a steadfast repayment policy and access to adequate funds to repay the credit within its due date.