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When you apply for a personal loan, the lender Bank or NBFC looks at various factors to determine your eligibility. One of the most crucial ones is your credit score. Most Banks and NBFCs fetch your credit score and report from CIBIL, India’s oldest credit bureau.
Your credit score (also called CIBIL Score in common parlance) is an indicator of how likely you are to repay the personal loan responsibly. Usually, individuals who have credit score of 750 and above are preferred by lenders and are most likely to get their personal loan application approved. There are also high chances that they would get the personal loan offers at low interest rates because these individuals would be perceived as low-risk borrowers, and lenders would be willing to offer their best rates to attract them.
But in case your Credit Score is poor or low, most large Banks and NBFCs will consider you as a ‘risky’ applicant and are likely to reject your personal loan application.
While a low credit score reduces the probability of being able to avail a personal loan considerably, there is still an outside chance of you getting it. For instance, if your CIBIL score is less than 600, say 550, there are very low chances of you getting a personal loan. But if your CIBIL score is around 650 or 700, some select lenders, mostly NBFCs, may still consider you for a personal loan offer. However, there are a number of factors involved for that to happen, which you should be aware of:
1. Adequate Disposable Income
If you have a stable and high income source, which provides with adequate monthly disposable income, to repay your personal loan EMIs in full on time, then certain lenders may look at your application favourably and approve you for a personal loan, despite a low credit score. This may also work for individuals who do not have any credit history and are new to credit.
2. Stable Job with Reputed Employer
Those employed with reputed corporates/MNCs or public sector organizations are considered to have higher income certainty than others. Hence, lenders may accept the personal loan applications made by such applicants, especially those with stable employment history, on the basis of their EMI repayment capacity, job stability and the reputation of their employers.
3. Select NBFCs and Fintech Digital Lenders
Those applying for a personal loan with a low credit score should note that most large Banks and NBFCs are unlikely to approve you for a personal loan, even if you have high disposable income and have a stable job. However, there are new-age NBFCs and Fintech lenders, that provide personal loans to individuals with low credit score, but at a high rate of interest.
4. Apply with a co-applicant
Adding an earning family member as a co-applicant to the personal loan application reduces the credit risk for the lender. This is because the co-applicant also becomes equally responsible for the repayment of the loan. Hence, if you are able to add a co-applicant, who has a good credit score, it may help you get your personal loan application approved.
Hence, do take a note of the above if you are looking for a personal loan and have a poor credit score. Do remember, that even if you get the personal loan application approved, it will come at a much higher rate of interest, increasing your EMIs and the cost of your loan.
In case you are unable to avail a personal loan because of your credit score, you may still be able to access credit through other lending products. Click here to know more – https://www.paisabazaar.com/personal-loan/bad-credit-loans/
Since, credit score will be an important every time you look to access credit, through a personal loan, home loan or a credit card, it is advisable to take the right actions to improve and build your credit score. This will enable you to avail loans and credit cards more conveniently and seamlessly.
Here are some likely reasons why your CIBIL Score is low: https://www.paisabazaar.com/cibil/reasons-for-low-cibil-score/