Getting a loan with a low CIBIL score is challenging, but choosing the right plan and a reliable lender can help you secure a loan easily. It’s crucial to take smart steps to ensure you’re approved and pay a low interest rate. Learn the powerful formula you can use to secure financial assistance despite a low score.
Why don’t you get a loan with a low credit score
Banks and non-banking financial companies (NBFCs) thoroughly evaluate a person’s credit score, repayment history, and financial behavior before granting a loan. If your score is below 600, lenders consider your default risk to be very high. Therefore, they either reject the loan application outright or set a very high interest rate upon approval. Additionally, the loan amount is reduced, and the terms and conditions become very strict.
How to Increase Your Chances of Loan Approval with a Low CIBIL Score
Even with a low CIBIL score, you can gain the lender’s confidence for loan approval by taking a few concrete steps.
1. Opt for a Secured Loan
If you take a loan against collateral, such as property, gold, or a fixed deposit, it is called a secured loan. This reduces the lender’s risk and significantly increases your chances of approval.
2. Add a Co-applicant or Guarantor
Include someone with a good credit score as a co-applicant or guarantor. This doubles the bank’s confidence and makes it easier for them to grant the loan.
3. Have Income Proof and Salary Slips Ready
Proof of regular income, especially salary slips, assures the bank that you will be able to pay EMIs on time. Income proof strongly demonstrates your repayment capacity.
4. Take a loan with a small amount and a short tenure
Taking a loan with a small amount and a short tenure leads to faster approval and a lower interest rate, as the risk for the lender is reduced.
Things to check before taking a loan
It is extremely important to conduct thorough research before taking a loan, especially if you have a low score. Experts recommend always taking a loan from a lender registered with the RBI (Reserve Bank of India). This ensures transparency and provides financial security. According to the RBI, approximately 1,600 digital lending apps are regulated. For example, if you take a loan of ₹1 lakh for 24 months, the processing fee can typically range from 0.5-4% and the interest rate can range from 14%-24% per annum, resulting in an EMI of approximately ₹4,800 to ₹5,300. Late payment penalties also apply, ranging from 1%-2% per month.
Important Factors to Check Before Taking a Loan
Before taking a loan, confirm that the lender is listed with the RBI. Be sure to check their customer reviews and ratings. Pay close attention to any hidden charges or processing fees. Clearly understand the total interest cost and financing terms. You can also compare personal loan rates from different banks by visiting online comparison websites.
Manage Loans Wisely
Pay EMIs on time to avoid penalties and score damage. Avoid taking on multiple loans and control unnecessary expenses. If you encounter any EMI-related issues, contact customer service immediately.
Warning: This information is for general awareness only. It is essential to consult your financial advisor for complete information before applying for a loan.