Several lending institutions today rely on technology to work online and dispense their services without the customer physically visiting the premises. This renders the process of submitting the loan application simple, and courtesy of the ease, there is high competition in the sector. However, lenders insist on the borrowers meeting certain basic criteria to qualify for the loan application, one of them being the CIBIL score.
A credit rating system which is used as a benchmark to indicate the past credit history of the borrower. Lenders insist on this to judge whether to approve the loan and how much.
CIBIL score meaning
A CIBIL score is a number ranging from 300 to 900 that is used to show the borrower’s creditworthiness. It is used by financial institutions or lending companies to judge which clients qualify for loans. Anything below 550 is regarded as a low CIBIL score. A range of 550 to 749 is considered fair, while 750 and above is preferred by all lenders.
Usually, financial institutions approve loans to individuals with high CIBIL scores and reject loan applications from those with low CIBIL scores. Low CIBIL scores are considered high-risk because there is a high chance of the borrower defaulting on the repayment, resulting in losses.
Loans for low CIBIL score
Getting loans with a low CIBIL score is not easy, given the current credit system. But there is still hope in the form of lenders that offer instant loans despite the CIBIL score being low. However, certain conditions have to be met to get instant loans for low CIBIL score. To this effect, discussed as follows are some easy steps to avail of an instant loan for a low CIBIL score –
Get a guarantor – If you have a low CIBIL score, your chances of getting an instant loan are limited. You will need to work harder to convince the lenders that you will repay the loan on time. Getting a guarantor is one easy step to achieving this objective when you have low CIBIL scores.
You must ensure that the guarantor must be one with a good score and, in most cases, an existing client of the lending company. To the lender, it is a way of minimizing risks. If you default payment, your guarantor will be held accountable and will need to pay on your behalf.
Proof of income – Before giving out loans, every lender will want to know if the borrower can repay. Therefore, proof of income is required to avail an instant loan for low CIBIL score. If you are employed in a reputed firm or organization, you may be required to provide copies of your latest payslips as proof of income.
Apply for a low amount – As they say, a journey of a thousand miles starts with the first crucial step. Consider applying for a lower amount to avail of an instant loan. No company will trust you with a huge loan when you defaulted on repayments in the past. Applying for a low amount will increase your chances of getting loan approval and minimize the rejection rate.
The beauty of starting small again is that you have a chance of rebuilding trust with lenders as you repay your loans. If you pay your loans in time, your score also improves, thus earning you a higher limit.
Tell your lender to consider NA/NH score – NA stands for not applicable while NH stands for no history. It means that an individual has no credit history. Either the person has never taken a loan in his/her entire life or has had an inactive period of a minimum of 36 months.
When your lender considers your NA/NH score, you will be able to get an instant loan, but in most cases, you will be given a high-interest rate. The positive side is that you have a chance to build a good relationship with the lender and improve your CIBIL score.
Work on errors in your credit report – Sometimes, one can get a bad CIBIL score because of unresolved errors that still show in the credit report. It could be a cleared loan that has not been updated, thus showing as defaulted in the report or scores not updated.
There are also instances of fraud, especially with mobile lending, where someone uses your details to access a loan and then does not pay it back. This may lead to a bad score though it is not your fault. By correcting such errors in your credit report you can avail an instant loan for low CIBIL score.
Although getting an instant loan for low CIBIL score is not easy, it is possible. You will need to prove to the lender that you will be able to repay the money. In some cases, you will be required to provide a guarantor who will vouch for you.
Instant loan for low CIBIL score is expensive because lenders tend to put a higher interest rate on them compared to loans for high CIBIL score. On the flip side, it still provides you with financial liquidity, which is the need of the hour.