Discover your Ideal Credit Score for a Personal Loan!

It is a misconception that only people who don’t have sufficient money to fulfill their financial needs take a loan. A loan, when utilized responsibly, can help you improve your credit score and credit report. Loans are usually repaid in EMIs. When you are aware of your monthly expenses, you are better equipped to manage your finances. Rather than repaying in a lump sum, with staggered payments like EMIs, you can invest your money elsewhere and earn a decent return.

There’s no denying that your credit score is an important parameter for loan lenders but not the only one. Smart borrowers know how to utilize debt to their advantage.

What is a Personal Loan?

A personal loan is a type of unsecured loan that has a short- or medium-term period. Such a type of loan doesn’t require any collateral and has no end-use restrictions. It can be taken for several reasons such as for a vacation, paying off debt, medical expenses, and wedding expenses, among others. Since it is an unsecured loan, the interest rates are some of the highest in the industry.

Credit Score and CIBIL Score are often used synonymously and refer to the 3-digit score ranging from 300-900. Your credit score when applying for a loan is reflective of how trustworthy or risky you are as a borrower. A credit score above 750 is considered good by most lenders; however it is not the only deciding factor. Generally, for a high-risk loan such as a Personal Loan, a credit score of 750 and above is needed. There are loans available for people with a low credit score as well as some that do not require a credit score.

Can I get a Personal Loan with a Low Credit Score?

The credit score is the first point of review when a person applies for a personal loan. Given below is the general classification of credit score:

CIBIL Score RangeRating

300-499Poor

500-649Average

650-749Good

750-900Excellent

Some lenders are willing to lend to borrowers who need a personal loan but have a bad CIBIL score. However, in such cases, the interest rate is higher and the loan amount is lower. In addition to this, some lenders may grant a personal loan without a CIBIL score too. Borrowers without a CIBIL score are those who do not yet have a credit history or whose credit history is less than six months.

Ways to get a Personal Loan with a Bad CIBIL Score

If for some reason, your credit history hasn’t been good or you have defaulted on loan repayments, your CIBIL score takes a hit. Applying for loans in the future might get difficult with a low credit score. On the bright side, if you need a personal loan with a bad CIBIL score, there are ways to approach your lender.

• Apply for a Low Loan Amount: For borrowers who qualify for the minimum credit score required for a personal loan, the process is quick and seamless. However, for someone with a bad credit score, the chances of getting a loan decrease. Lenders view such candidates as a risky proposition and who are more likely to default. In such a case when you need a loan with a bad credit score, you may consider lowering the loan amount. The lender may be more inclined to grant the loan as its risk is reduced. Moreover, repaying a lower personal loan amount will be easier on you.

• Furnish Income Proofs: The main reason for the rejection of a loan application is the lenders’ perception of a borrower not being able to service the loan repayments. Although you may have a low credit score but your income or salary could be enough to cover the loan EMIs. You can furnish income proofs or salary slips to convince the lender of a steady income and your repayment capacity.

• Get a Co-Applicant or Guarantor: If your credit score doesn’t match the loan criteria, you may consider getting a co-applicant or guarantor with a good credit score onboard. This decreases your lender’s risk liability and may help you get the loan.

• Check Your CIBIL Report: Your CIBIL report derives its information from various lenders and banks. It is important to check your credit report periodically and report any discrepancies to CIBIL. Chances are your latest credit history details haven’t been updated with CIBIL and thus have negatively impacted your loan credit score and credit report.

Can I Get a Loan Without a Credit Score?

Yes, you can get a loan without a credit score or with a low credit score. Gold Loans and Loans against Fixed Deposits do not require a credit check. If you have a low credit score, loans such as Loan against Property (LAP), Loan against Securities (LAS), Loan against Rent Receivables (LARR), etc. could be options for you. Since all of these mentioned loans are secured loans, the collateral can be liquidated by the lender in case of a default. It reduces the liability risk for the lender. Check with your lender for loan options if your credit score is unsatisfactory.