Your credit score or CIBIL score is one of the most important aspect of your personal monetary management. It defines your creditworthiness and is calculated on the basis of a multitude of factors including credit utilisation rate, timely repayment of dues, and other behavorial aspects constituting ones’ financial discipline. On the other hand, when we categorise personal loans from an institutional perspective, we find that such loans are the riskiest primarily based on the fact that there is no collateral at play here. It is because of this inherent risk factor that personal loans are so difficult to obtain. Moreover, you might be going through some immediate financial emergency and need cash at this very instance. So, how do you get a personal loan without a good credit score? Let’s find out-
Dispute Errors In Your Credit Report
Without a doubt, you may completely be in the clear on these grounds. Maybe, the reporting agency made some clerical error which resulted in your credit report. It may also be the case that the reporting agency has not properly updated the CIBIL database which results in display of worsening credit scores.
Mistakes like these are all too common when it comes to such ratings and reports. However, if you find such errors it is vitally important that you report the same to the relevant authorities in a push to get it fixed, you won’t have to deal with a low credit score in the first place!
Ask for a Low Personal Loan Amount
One of the factors which tips off the lender against your side is when a disproportionately large sum is requested for. You are perceived as a high-risk candidate if you approach the bank with a high loan amount but a low CIBIL score to back it up as from the lender’s point of view, you present a greater probability to default on such a large amount.
However, you may expect leniency in cases where the amount is relatively low and structure the loan in a way that you will be more comfortably with the periodic pay-outs on the same.
Submit Evidence of Income
Maybe you do need a large loan amount and there’s no mistakes in your credit score either, what’s your option now? Well, if you have had a recent hike in salary or accrued some additional income source, as such material developments are not updated instantaneously in CIBIL database may present you with an opportunity to submit the same to your lender and pleading for a loan.
More importantly however, showing that you have a secure job and a steady income flow, the likelihood of banks approving your loan increase as well. However, this might result in the banks levying higher interest rate on your loans.
Apply for Joint Loan or Find a Guarantor
Granted that your credit score may not be up to the mark, however a lot of lenders have the possibility of taking out a loan with a co-applicant or a guarantor. In essence, if a personal loan has more than one beneficiary for instance husband and wife, say the husband has a worse credit score than the wife does. In such an instance, it would make more sense if a joint loan is taken out as the bank would be comfortable with the wife being a joint owner of the debt.
Apart from this, you may also find a guarantor. Basically, a guarantor is an individual who affirms in the contract to grant a loan the fact that they would be responsible for repaying the loan in instance of the original debt owner fails. Thus, lenders have a safety net in place and you have a higher likelihood of getting your loan approved.
The Bottom Line
So, as things stand now there’s no way you are getting a personal loan without a credit score. However, there are ways to manage your low credit score towards your advantage. As Prithvi Chandrasekhar from InCred noted-
Yes, it is possible. However, your loan may be smaller and the interest rate you pay may be higher. Lenders will generally ask you for evidence of income. If you can show lenders that you have a steady income with which to repay the loan, they are a lot more likely to lend. Offering an asset such as property or gold as collateral makes it easier to get a loan. You can opt for a joint loan. If your co-applicant has a high CIBIL score, it could help you get a loan based on their record
However, do remember that loans can be a boon or a bane depending on how you plan on using it. Be careful and aware of the consequences and repercussions of taking out a loan before committing to the same.