Low Cibil score? Here’s how you can still get a loan
CIBIL or credit score is an important measurement that is used by financial institutions to check when they receive a request for credit from individuals. A high credit score guarantees quick disbursement and helps in obtaining loans at a relatively lower interest rate.
On the other hand, a low CIBIL score indicates poor creditworthiness of the borrower and complicates loan approval.
In the current scenario, all lenders have become extremely cautious in granting new loans, due to the ongoing liquidity crisis. This means that having a low credit score can be a big challenge, especially if a person is looking for a large loan.
However, there are some ways to try to get a loan even with a low credit score.
Apply to an NBFC
A client with a low CIBIL score must apply for a loan from NBFC. The NBFCs have relaxed their policies towards customers with low credit scores.
“Every loan application assessment is supported by a review of the credit report and this often leads to in-depth investigations. This can negatively affect the profile of an individual with a low credit score. Additionally, just in case the application would be rejected (the chances are high in the case of commercial banks), this can further degrade the CIBIL score. It is therefore a question of applying for an NBFC ”, suggests Pranjal Kamra, CEO of Finology.
However, an important thing to note here is that the interest rates charged by NBFCs are generally higher than those offered by banks.
Secured loan application
Some banks and financial institutions offer loans to those with a low credit rating, as long as they apply for a mortgage backed loan.
“Those in urgent need of funds may consider options like a loan in gold, loan against property or loan against securities, where the credit rating has a relatively less impact on the lender’s decision,” says Gaurav. Aggarwal, Director and Head of Unsecured Loans, Paisabazaar.
In this case, the loans are generally accepted by the lenders as collateral to disburse a secured loan.
Apply for a joint loan
Those with a low CIBIL score can also add their spouse or a family member who has a decent credit history as a co-borrower or guarantor.
“This can increase the chances of getting a loan at a competitive rate,” says Kamra.
Opt instead for a small loan
Since a lender is reluctant to offer a loan to someone with a low credit rating, one can also take out a small loan in order to repay it easily and build creditworthiness in the process, suggests Anuj Kacker, co-founder. by MoneyTap.
“Once an individual achieves this, they can opt for a larger loan from a bank or any other financial institution,” he adds.
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First publication: STI