Securing a Personal Loan with a Low CIBIL Score: What You Need to Know

Personal Loans are the most convenient financing options if you need additional funds to meet various planned or urgent expenses. Since these loans have no usage restrictions, you can use them for any personal purpose like a wedding, medical emergency, higher education, home renovation, or vacation. However, since these are unsecured loans, you must convince the lender of timely repayment to get approval.

Your CIBIL score is crucial in determining your loan eligibility and creditworthiness. It is a 3-digit number summarising your credit history, helping lenders assess your credibility and repayment capacity. There is no special category for a low CIBIL score Personal Loan. However, if you are looking for one, there are ways to improve your chances of approval with Hero FinCorp. In the following sections, we will explore how to get a Personal Loan with a low CIBIL score and how you can improve your eligibility.

Understanding What is CIBIL Score

Before diving into the tips to get a low CIBIL score Personal Loan, it's crucial to understand what a CIBIL score is and its impact on your loan eligibility. It is a 3-digit measuring scale from 300 to 900 that the credit bureau assigns based on your credit history. The higher the credit score, the higher your creditworthiness. A score above 700 is good enough to get an easy loan approval, while one below 650 is considered average or poor.

Here is a brief idea of what a CIBIL score looks like:

CIBIL Score	Good or Bad?	Chances of Loan Approval
Less than 600	Very bad	Extremely low
600-649	Bad	Low
650-699	Satisfactory	Possible
700-749	Good	High
Over 750	Very good	Extremely high

 

Every legitimate lending institution uses a credit score to determine your risk as a borrower. If you have a bad credit score, most lenders will hesitate to approve your loan application. Even if they approve your loan, they will charge a higher interest rate than those with a decent CIBIL rating. Therefore, try improving it before applying instead of applying for a Personal Loan with a low CIBIL score. Still, if you need funding for an urgent requirement, learn ways to improve your chances of approval.

Ways to Obtain a Personal Loan with a Low CIBIL Score

Obtaining a Personal Loan from Hero FinCorp with a low credit score requires you to meet the eligibility criteria. If you qualify, here are a few ways to enhance your chances of loan approval, even with a low credit score:

• Check Your Credit Score

The first and most crucial step is to check your credit score and ensure you meet the minimum eligibility criteria. If your score is below 700, focus on improving it before applying for a loan.

• Verify Your Credit Report

Thoroughly examine your credit report and ensure it is error-free and accurately represents your credit history. Remember, even a small documenting mistake in your credit report may wrongly affect your credit score, decreasing your loan eligibility.

• Prepare Personal Loan Documents

Lending institutions largely rely on your Personal Loan documents to verify your identity and evaluate your finances. You must provide your identity, address, and income proof to demonstrate your creditworthiness to the loan provider.

• Provide Collateral

If your CIBIL is low, some lenders may still approve your loan application against an asset as collateral. By applying for a secured loan, like a Loan Against Property, you can boost your chances of loan approval.

• Build a Relationship with the Lending Institution

Building a positive relationship with a loan company is extremely useful. For instance, if you have already taken a loan from Hero FinCorp and paid your EMIs consistently, you may get approval despite a low CIBIL score.

• Apply for a Smaller Loan Amount

Applying for a smaller loan amount may improve your chances of getting a low CIBIL score Personal Loan. The lender will feel safer lending a smaller loan amount as it reduces their credit risk. By borrowing a small loan, you can repay your EMIs on time and improve your credit score to improve eligibility for future loans.

• Prove Enough Income to Support EMI Payments

If you have additional income sources besides your salary, show them to the lender to improve your eligibility. A higher income will make the lender feel confident in granting your loan despite a bad credit score. However, the lender may charge a higher interest rate in such a scenario.

• Reduce Your DTI Ratio

A low debt-to-income (DTI) ratio may convince lenders to approve your loan application even if you have a limited income. That is because if you don't have hefty financial obligations to fulfil from your income, you may conveniently accommodate loan EMIs into your monthly budget.

• Apply with a Co-Applicant

When looking for a low CIBIL score Personal Loan, include a co-applicant to improve your eligibility. If they have a decent income and credit rating, the lender may approve the loan application based on their credibility. Ask the co-applicant beforehand and tell them to provide signatures and complete KYC formalities.

• Secure a Guarantor

Applying with a guarantor ensures the lenders will receive their repayment irrespective of your financial condition. However, ensure your guarantor has a decent CIBIL score, encouraging lenders to take your lending risk. Also, take responsibility for repaying the EMIs on time, as missed EMIs will affect their credit rating.

Tips to Improve Your CIBIL Score

Getting a low CIBIL score Personal Loan can be challenging for most. Here are a few tips to improve your credit score to increase your chances of approval at reasonable interest rates:

• Check your credit report and dispute any errors in it.
• Pay all your loan EMIs and credit card bills on time.
• Borrow sparingly only when you need it the most.
• Use at most 40% of your available credit limit.
• Keep your financial obligations to the minimum to control your DTI ratio.
• Diversify your credit portfolio with different loan types, including secured and unsecured credit products.

Getting a low CIBIL score Personal Loan is full of obstacles. However, it is not impossible. Following the tips mentioned here can improve your chances of getting approved for a loan with Hero FinCorp. Ideally, try to improve your CIBIL score before applying to get the best loan deal. That might take some time, but the wait is worth the benefits in the long run.