Low credit score? Here’s how you can still get a loan
New Delhi: Your credit score or CIBIL score is the most important prerequisite when taking out a loan, as it gives the lender a picture and lets them decide how likely you are to pay them back on time if they offer you a loan or credit. in the future. It also gives lenders insight into how you are using your credit, which is why it is important to monitor your credit score.
A high credit score also sometimes guarantees that you get a loan at a relatively lower interest rate. On the other hand, a low CIBIL score indicates poor creditworthiness of the borrower and reduces your chances of obtaining a loan.
In order to improve your credit score, it is advisable to pay your bills on time. When reviewing your credit report, lenders will see how reliably you pay your bills. Pay your bills on time because late payments not only result in penalties, but also affect your credit score. Also set up automatic payments or monthly reminders if you forget to pay your bills. However, there are some ways you can try to get a loan even if your credit rating is low.
1. Apply for a loan from an NBFC:
Instead of applying to a bank, a client with a low CIBIL score can apply for loans from NBFCs because the likelihood of getting loan approval is high there because NBFCs have relaxed policies towards clients with low credit scores. Before applying for a loan, you should know that every loan application assessment is supported by a review of the credit report which often leads to in-depth investigations.
If your CIBIL score is low, it is best to apply for an NBFC. However, an important thing to note here is that the interest rates charged by NBFCs are generally higher than those offered by banks.
2. Secured loan:
Some banks and financial institutions approve loans from people with even low credit scores, on condition that they apply for a mortgage backed loan, that is, a secured loan. Those with low credit ratings and in dire need of funds may consider options like a gold loan, a property loan, or a securities loan, where the credit rating has a relatively less impact. In this case, the loans are generally accepted by the lenders as collateral to disburse a secured loan.
3. Solidarity loan:
Those with a low CIBIL score can add their spouse or other family member who has a decent credit history as a co-borrower or guarantor, which can increase the chances of getting a loan at a competitive rate.
4. Small loan:
Since a lender is reluctant to offer a huge loan to a person with a low credit rating, one can try to take out a small loan so that it is easy to repay. This will strengthen creditworthiness in the process. Once their credit rating improves and their credit history is better, they can opt for a larger loan from a bank or other financial institution.
Note that your credit score can be affected due to a number of factors such as missed deadlines, a poorly managed credit cycle and more. A high credit score ensures that your loan application is approved and the money is paid out quickly.