It is now easier than ever to get a loan in India for 2020. Your CIBIL score is a key aspect if you’ve been thinking about getting a loan in India. You have been looking into loans for a while and you know that one of the most important aspects any lender will look at when you apply to for a loan. If your CIBIL score is low, your chances of being approved are much lower.
We often believe that borrowers with low CIBIL scores cannot get loans in India. But that is half the truth. You can still get the loan that you need even if you have a low CIBIL score. We will be discussing this in today’s article. Let’s get started.
What is a CIBIL Score?
Understanding the meaning of your CIBIL score is one of the most important things you should know. Your CIBIL score, which is simply the credit score assigned to you by CIBIL credit rating agency, is basically the credit score. Your credit score is essentially a numerical score that is calculated based on your past credit behavior. It is an indicator of your creditworthiness.
There are two major credit rating agencies in India or credit bureaus as they are commonly called. The first one is CIBIL, and the second Experian. Both private agencies have government authorization to access your credit history and determine if you are credit-worthy enough to obtain a loan. Four main factors are considered when calculating your credit score:
- Your total loans taken in the past
- The total amount of debt that you owe
- How many EMIs have you paid in the past
- If any, the number of missed payments
All these factors are taken into account and your credit score is calculated using a scale from 900 by both Experian and CIBIL. Generally speaking, a CIBIL score greater than 750 is considered favorable when applying for a loan.
What should you do if your CIBIL score is low?
There are a few ways to get the loan you want if you have a low CIBIL score. These are the ones you will see below.
Display records of timely payments
Credit rating agencies take into account the amount of time you have paid your bills in the past when calculating credit scores. Your credit score will be affected if you default on loans or miss payments. If you are currently unable to make a loan application due to low credit, it is best to prove to the lender that all of your existing debts have been paid on time. This includes your credit card bill and your home loan. It is easier for the lender assess your creditworthiness and determine that you are now more creditworthy if you have been paying your debts on time.
Show Your Income Sources
Although it is true that lenders will consider your credit score first, when you apply for a loan they also consider other factors. Lenders will often consider your income source when assessing your loan application. To increase your chances of getting approved for a loan, you should share your bank statements with the lender. The lender will appreciate your ability to show a steady income and any bonuses or additional income from other sources. This will make it easier to determine that you are financially stable and will be able pay off your EMIs in a timely manner.
Get a loan from an NBFC
This is something that most borrowers don’t know. If you have a low CIBIL score your chances of getting a loan are higher through an NBFC than through a commercial bank. This is because commercial banks offer loan services to many people and receive many applications every day. Banks use credit scores to determine which applicants are eligible for loans. If you have low credit scores, your application will almost always be rejected.
However, NBFCs (non-banking financial institutions) cater to a smaller and more targeted audience. This is because they get fewer applications per day and have a more flexible policy regarding credit scores and credit history. Banks give priority to your credit score. However, NBFCs consider a variety of factors when considering your loan request. This increases your chances of being approved.
It is important to note that when a commercial bank inquires about your credit score it treats it as a difficult inquiry. If your loan application is denied, your credit score could even drop. An NBFC will request your credit score, but it is considered a soft inquiry. Therefore, the impact on credit scores won’t be as significant.
Apply for a loan with a co-borrower
The last but not the least, a co-borrower is a great way to get your loan application approved if you have low credit scores. You can ask your spouse to co-borrow your loan application. If you’re married, your partner can be your coborrower. If you’re not married, your parents can be co-borrowers. A co-borrower is important because it will give your lender trust that you will repay the loan. Thus, defaults will be much less likely.
You must also consider the fact that your co-borrower should have good credit scores. This will make it easier to get a loan.
End of Lines
Although it is true that a low CIBIL score can make getting a loan more difficult, there are still steps you can take to get the loan you want.
Also, remember that even though your credit score may be low right now, you can still work hard to improve it in the future.
Follow the steps in this article to apply for a loan with the lender that you prefer.
