Tips for Getting Approved for an Online Personal Loan with a Low Credit Score

4 Mins read

Most lending institutions demand a decent credit score to approve loan applications. It helps them evaluate your creditworthiness and decide on an adequate loan amount, interest rate, and repayment tenure. However, your CIBIL score might be low due to several reasons. It will be zero if you have never borrowed a loan. On the other hand, it might be low if you have multiple dues or defaulted on your EMI payments. If you are looking for a Personal Loan with a low CIBIL score, here are a few ways you can consider. But first, let’s learn what a CIBIL score is. 

What is a CIBIL Score?

When you apply for a personal Loan you should be aware of the meaning of a personal loan. While proceeding Loan providers evaluate your creditworthiness by your credit score. CIBIL, a leading credit bureau in India, records your credit-related activities and gives a credit score based on your financial stability. On the other hand, a poor credit score indicates you have defaulted on your EMI and credit card bill payments in the past. It signifies financial difficulties, insufficient income, a high debt-to-income (DTI) ratio, and irresponsible credit behavior. As a result, financial institutions reject your loan application.

Personal Loans are unsecured. Hence, you don’t need to provide any guarantor, security, or collateral to obtain it. Therefore, lenders use your credit score as a parameter to evaluate your eligibility for a Personal Loan and repayment capacity. However, the CIBIL score is only one of the conditions they consider. You can get a Personal Loan for low CIBIL score through other ways, including the following:

  • Show a Job With a Good Income

Financial institutions examine your monthly income and expenses to determine your sanction amount. A DTI ratio of at most 40% after meeting all your financial obligations is desirable. Considering the increasing inflation rates, those with limited income always find it challenging to cover their costs and save money. Therefore, you must show a stable job with a decent salary of at least Rs 15,000 per month. 

You may also show other income sources like rent, investments, and revenue from hobbies, part-time jobs, freelance work, etc. The higher the income you can show, the easier it becomes for lenders to approve the loan despite a low credit score.

  • Get a Personal Loan With Flexible Terms And Conditions

Research and compare various loan deals to determine how they fulfil your loan requirement. Extensive research with multiple offers helps you choose a loan scheme with flexible terms and conditions. 

  • Request an Adequate Loan Amount

Requesting a large amount while looking for a Personal Loan with a low CIBIL score poses a higher risk for the lender. It increases their risk, encouraging them to reject the loan application. Therefore, evaluate your loan requirement and apply for a lower amount to build confidence in the lender and increase approval chances. Demanding a loan according to your need and repayment capacity will convince the loan companies to respond positively and happily approve your application.

  • Monitor Your CIBIL Score

Monitor your credit report at least once every quarter to check for any changes and their reasons. Checking your expenditure and credit score will help avoid overspending and exposing your credit to risk. Ensure all facts in the credit report are correct. If you notice any inaccurate statistics, report them to the credit bureau immediately to get them corrected as soon as possible. If your credit score is low for a valid reason, identify and work on it to improve your score.

  • Apply for a Joint Loan with a Co-applicant or Guarantor

A low credit score might lead to a loan rejection. However, applying for a joint loan with a co-applicant or guarantor may help you get approval faster. You can begin the application process with consent from your guarantor or co-applicant. Considering the ‘secondary borrower’ is responsible for timely repayment, the lender may approve a Personal Loan with a low CIBIL score.

  • Get Ready to Pay a Higher Interest Rate

You cannot bargain on the interest rate too much when you need an urgent loan with a low credit score. It might provoke the lenders to reject your loan application right away. Instead, request a smaller sum that the lenders may approve at a higher interest rate. Increase your credit score with timely repayment and get a better deal next time.

Rebuilding Your Credit Score 

After getting a Personal Loan with a low CIBIL score, restoring it as soon as possible is imperative. Here are a few tips that help:

  • Pay off outstanding balances to reduce your debt-to-income ratio.
  • Ensure paying all your loan EMIs and credit card bills on time.
  • Reduce credit card usage to lower your credit utilisation ratio.
  • Avoid applying for credit unless unavoidable.
  • Diversify your credit portfolio with different types of credit lines.
  • Check your credit report regularly to rectify errors and stop them from holding down your credit score.

Things to Avoid When Applying for a Personal Loan with a Low CIBIL Score

Here are a few things you must avoid when applying for a Personal Loan with a low CIBIL score:

  • Hiding your past transactions, as your credit report will say it all. 
  • Not giving complete information about all your existing loans, outstanding balances, and EMIs.
  • Using incorrect or fake documents to apply for a loan.
  • Applying for multiple loans simultaneously, hoping to get approval from some of them.
  • Not disclosing all your income sources.

When looking for a Personal Loan with a low CIBIL score, you would not want to delay your approval when you need funds in an emergency. Although a poor credit score is an obstruction, it should not stop you from living a respectful life. To get a Personal Loan despite having a poor CIBIL score, follow the tips mentioned in this article to get approval. However, use the loan judiciously and repay on time to improve your credit score over time. In the future, you will enhance your eligibility for a Personal Loan to get faster approval at lower interest rates and favourable terms and conditions.

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