Whether it is handling unexpected medical bills or paying for your children’s tuition fees, personal loan come in handy during planned and unforeseen monetary needs. Lenders assess various factors, such as CIBIL score, your employment type, etc., before they approve or reject your application.
They use this information to assess whether you will be able to manage the loan repayment comfortably. With a high score, the likelihood of approval increases since lenders consider you a credible borrower. Thankfully, you can get a loan even if your CIBIL score is low.
Read on to learn ways in which you can get a loan with a low score and more.
Strategies to Get a Personal Loan with a Low CIBIL Score
By planning your loan application smartly, you can boost the chances of approval. Here are some strategies you can incorporate in your planning:
Apply for a Smaller Loan Amount
One of the smartest ways to get approval on your application is by applying for a lower amount. Since a lower amount reduces the default risk for the lender, they may approve your request easily.
Assess your requirements thoroughly and apply for the exact amount you need. In addition to increasing your chances of approval, this will also make repayment more manageable for you. This is because the overall debt will be lower, leading to smaller EMI amounts as well.
Provide Evidence for a Stable Income
The main reason why lenders reject your application if your CIBIL score is lower is because they are not convinced about your repayment capacity. To demonstrate your ability to pay the EMIs comfortably, you must show that you have a stable income.
Disclosing all your income sources can be an intelligent decision, such as:
- Salary or pension
- Income from business or profession
- Rental income
- Investment income
You must also provide all the essential documents serving as evidence of your regular income and employment. These may include:
- Salary slips
- Bank statements
- Income tax return
Involve a Guarantor or Co-applicant
Another way to persuade the lender to grant approval is by applying with a co-applicant or a guarantor. To increase the credibility of your application, you must involve a co-applicant or a guarantor with a high CIBIL score. With this strategy, the default risk of the lender is reduced.
This is because in case you are unable to repay the amount, the guarantor or co-applicant is responsible for clearing the debt.
Check Your Credit Report for Errors
Reviewing your credit report regularly is a healthy habit for your finances. It helps identify any errors or missing information which can lead to a lower CIBIL score. Once you spot these errors, you must get them rectified with the concerned authorities as soon as possible.
With an increase in your credit score after these rectifications, the likelihood of approval on your application also increases. Here are some common errors that may arise in your credit report:
- Incorrect or duplicate accounts
- Closed accounts showing as open
- Late or missed payments reported inaccurately
- Outdated information, such as discharged debts
- Incorrect public records like liens or bankruptcies
Apply for a Secured Loan
Another way to get approval on your application is to back it up with security. These types of loans are also known as secured loans.
When you pledge an asset as collateral for the funds, the risk for the lender is reduced. This is because the lender can legally leverage your pledged asset to recover the debt in case you fail to repay it on time. Here are some of the assets that you can pledge as collateral:
- Gold
- Real estate
- Investments
Tips to Enhance Your CIBIL Score
Even if it is possible to get a loan with a lower CIBIL score, it is always a good idea to work on improving your score. Generally, lenders approve your application easily if you have a score of 750 or above. Here are some tips:
Repay Your Dues on Time
Clearing all your dues and bills on time reflects you as a creditworthy borrower, which increases your CIBIL score over time. Therefore, ensure you pay all your dues before the due date, including:
- Loan EMIs
- Credit card bills
- Utility bills
Maintain a Good Credit Mix
Keeping different types of credit accounts in your portfolio shows you have experience with credit. This shows that you manage your finances responsibly, which leads to an increase in your score. Here are some of the types of credit that you can opt for:
- Personal loans
- Home loans
- Credit cards
Keep Your Credit Utilisation Ratio (CUR) Low
This ratio shows the credit you utilise with respect to the total credit limit you have. A higher CUR shows a high dependence on credit, which leads to a lower score.
You can reduce the ratio by paying your existing debts and using your credit cards responsibly. Ideally, you must try to keep this ratio below 30%.
With these strategies, you can enhance the likelihood of approval and manage your fund requirements easily. On Bajaj Markets, you can get a plethora of personal loan options in a single place.
This lets you compare the rates and other terms that various lenders offer and go ahead with the most suitable one. Getting a personal loan on Bajaj Markets offers numerous benefits for a seamless experience. You enjoy a straightforward application process with minimal formalities.
