CIBIL score: Can you get a personal loan with a low credit score?

Checking your credit score before availing of a loan has now become as essential as checking if you qualify for the loan based on the lender’s eligibility criteria. This is because a high credit score puts you in the driver’s seat when it comes to negotiating for a more pocket-friendly interest rate as well as getting you the loan amount you desire and vice versa.

Your CIBIL score refers to the credit score assigned by TransUnion CIBIL, one of India’s oldest credit information companies, which is popularly used by lenders. This is why credit score is often called CIBIL score in India.

What is the ideal CIBIL score in India to apply for personal loan?

CIBIL Score Check is even more important when it comes to borrowing unsecured credit like a personal loan. The best CIBIL score for a personal loan is considered anything above 750 out of a potential 900. This score assures lenders that you are creditworthy, which means you may be trusted to repay the loan without default. On the other end of the spectrum, the lowest CIBIL score required for a personal loan depends on lenders, each of whom have their own internal policies; however experts suggest that 650 is the minimum score required for a successful personal loan application.

How are CIBIL scores and loan approvals linked?

When it comes to CIBIL score, Indian lenders are cautious about granting loans to borrowers who don’t meet the ideal standards. Here are the percentage of sanctions by score as per CIBIL.

Below 650: 4.7%

650-699: 5.2%

700-749: 9.7%

750-799: 22.8%

800+: 57.6%

As you can see, less than 10% of loans have been sanctioned to those with a score below 700.

Can you get a personal loan if you have a low CIBIL score?

Yes, no matter whether your score is lower than 750 or lower than 650, you can still get a collateral-free loan. Lenders offer a personal loan for low CIBIL scorers on certain terms and all you’ve got to do is meet them in order to get the funding you require. These terms usually revolve around your repayment ability and income. If you can showcase that you have the ability to repay the loan on time, you can get a personal loan with a low CIBIL score too. Keep in mind however that it makes it even more important for you meet the lender’s other eligibility criteria regarding your age, place of residence, and monthly income.

Tips on getting a personal loan for low CIBIL applicants

Here are some tips on getting a personal loan in spite of having a low CIBIL score. Keep in mind, however, that lenders may give you a lower loan amount at a slightly higher rate of interest in such cases.

  • Prove your income and job stability

A stable job at a reputed organisation helps lenders view your loan application in a positive light in spite of a low CIBIL score as it points to financial ability. So, submit your salary slips of the last 6 months to reassure lenders that you will be diligent with EMIs. Here, you can even showcase your investments as well as income from other sources, be it freelancing, rental income and more. All this helps lenders understand that you have the means to pay monthly instalments without missing due dates.

  • Apply with a co-applicant with a high credit score

When you apply for a personal loan jointly with a spouse or family member who has a good CIBIL score of 750 and above, you can get approval even if your score is lower. Two applicants also means the responsibility of repayment is divided on two people, which furthers lowers the risk from the lender’s perspective.

  • Apply for a lower loan amount

Decreasing default risk for the lender is another way of getting approval, and if you apply for a reduced personal loan amount, you may be able to get a loan in spite of a low CIBIL score.

  • Apply with a security

When you have a low CIBIL score, instead of a collateral-free personal loan, you can apply for a loan secured by gold, an FDor other investments, or by attaching a property asset as security. This helps lenders bank on an asset in case of non-repayment, and helps you build your CIBIL score on successful repayment too.

While there are ways you can build your CIBIL score, this may take some time. When you’re in a hurry, another tip to keep in mind when you notice you have a low CIBIL score is to check your Credit Information Report (CIR), which you can download along with your score. See if there are any errors here that are bringing down your score. For instance, this report lists a previous loan you may have already repaid in full as still open or an EMI you have already paid is listed as overdue. Correcting these errors can improve your score and you can start the process to raise a dispute right from the CIBIL website.

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