CIBIL Score: Can You Get A Personal Loan With A Low Credit Score?
Taking loans or buying things on credit creates a financial burden for the person concerned, but people need to take out loans, especially for large purchases of fixed assets like a house, a car, or for higher education. So it is better to maintain a good credit rating, so that when needed, a loan can be taken out easily at a favorable rate.
Credit Information Bureau (India) Limited (CIBIL) is the organization that maintains credit scores (CIBIL Score) based on various criteria that affect creditworthiness.
What is the ideal CIBIL score in India for applying for a personal loan?
“The ideal CIBIL score would be over 550 to get good interest rates and also be able to borrow a larger ticket amount,” says Raghuvir Gakhar, CEO of CashBean (PC Financial Services Pvt Ltd.).
How do CIBIL scores and loan approvals relate?
“The CIBIL score works as a key underwriting decision factor for the lender, the higher the score the better your chances of getting a loan approved,” says Zafar Imam, CEO of FinShell Pay.
“The CIBIL score is a summary of credit history, derived using details found in the“ Accounts ”and“ Investigations ”sections on the CIBIL report. The Cibil score can range from 300 to 900. The closer your score is to 900, the greater the chance that your loan application will be approved. It also reflects any DPD (payment due) or settlement if it occurred in one of the earlier accounts. This report helps to assess the financial character of the client, ”he adds.
When to borrow and how credit scores help you borrow
Can you get a personal loan if you have a low CIBIL score?
“When you have a bad Cibil score, getting a personal loan can be difficult, especially from traditional lenders. CIBIL is one of the best ways to assess a client’s creditworthiness. Since PL is an unsecured loan, the CIBIL score becomes much more important for the lender, ”explains Imam.
“However, there are many new age lenders who can offer a personal loan despite a low CIBIL score. They may charge a higher interest rate, offer the loan for a shorter term, and a smaller loan amount. There are many fintechs that offer short term personal loans ranging from 10,000 to 50,000. They can thus be a little more flexible to accept the low CIBIL score. These fintech companies also use alternative data, viz. reading text messages from your mobile to assess your cash flow and credit behavior. A few fintech companies aim to offer personal loans to consumers who have a low CIBIL score because they specialize in this segment and have a robust credit scoring method for these clients, ”added Imam.
Some tips for getting a personal loan for low CIBIL applicants?
“Digital lenders are the best option for low-credit borrowers not only to get loans, but also to improve their target score. Usually, traditional banks wouldn’t give another look at people who might be new to the loan market or who might have a bad score due to some singular incident, but thanks to digital lending, one can, step step by step, throughout the borrowing process and in a timely manner. reimbursement can increase their scores. At the same time, one should always try to start doing this by taking out small loans instead of taking something that the individual will feel a lot of pressure on and this is especially true with digital lenders who tend to give loans online. unsecured cash but at a higher interest. rates than banks, ”says Gakhar.