The credit landscape of India has witnessed consumers’ significant shift towards availing of smaller ticket loans. As per RBI, credit outstanding in the personal loan sector has escalated by 12.1% from FY2020 to FY2021 owing to its quick disbursal of loan amount and less stringent terms.
Credit advances like personal loans depend on certain factors like borrowers’ credit profiles and CIBIL scores. A CIBIL score of 750 and above is considered ideal for lenders and ensures quick disbursal of the loan amount at a competitive interest rate. However, there can be scenarios where borrowers can obtain a personal loan for CIBIL Score of 550.
3 Simple parameters to avail of a personal loan with a CIBIL score of 550
Although the CIBIL score reflects the borrowers’ creditworthiness and is a significant determinant of getting approval for the loan, simple parameters will help borrowers avail a personal loan for a CIBIL score of 550.
- Disclose additional disposable income: One of the significant parameters to avail a personal loan with a lower CIBIL score is to reveal an additional source of income to the lender. Additional income sources can be a rented property or other side-hustle. It will assure the lender regarding the borrower’s repayment capability. Moreover, producing documents that state borrowers’ hike in salary, return from investments, etc., will help borrowers avail of the credit option despite poor CIBIL scores.
- Make a loan application with a co-applicant: Making a loan application with another earning member or a guarantor can prove beneficial for borrowers with a personal loan for CIBIL score of 550. Applying with a co-applicant lowers the credit risk on the lender’s part as the responsibility of loan repayment is divided equally between the two applicants. Additionally, if the co-applicant has a decent credit score and stable income, it will increase the chance of the borrowers to fetch personal loans at an affordable interest rate. However, to receive approval, the co-applicant will also have to adhere to the eligibility parameter and submit KYC papers and other proof of income.
- Consider rechecking the credit report: Credit reports may have clerical mistakes, or any latest update is not applied to the credit record. Both these can have an adverse effect on a borrower’s credit score. Hence, borrowers must fetch regular updates on credit reports; slight rectification will reflect the credit score.
Furthermore, asking for a lower personal loan amount will help borrowers receive approval from the lender. On the other hand, applying for a high loan amount with a lower CIBIL score will increase the chance of loan rejection as lenders will doubt their repayment capability. Moreover, asking for less loan principal will reduce monthly instalments, helping borrowers improve their credit scores.
Additionally, borrowers can avail of personal loans from instant loan apps, as most of these apps help one receive loan amounts without scrutinising credit scores.
These money loan apps are user-friendly and demand minimal documentation, making personal loans a highly accessible credit option.
Reasons for a low CIBIL score
There are several reasons which lead to a substandard credit score –
- Missed or delayed loan or credit card payment: Failing to repay the loan or credit card amount by the due date hampers one credit score. Missing out payments projects borrowers’ inability to repay the loan amount on time.
- Applying for multiple loans or credit cards: Availing multiple loans shows borrowers are under several financial obligations, impacting their credit scores.
- Maximum usage of credit limit: Using a credit amount beyond the specified limit shows irresponsible behavior of a borrower, which subsequently lowers one’s credit score.
Apart from a low CIBIL score, borrowers should also know the other reasons for personal loan rejection and how to avoid them.
The fact that borrowers can avail of a personal loan despite lower credit scores is one of the multiple reasons why personal loans are emerging as the preferred means of financing.
Apart from knowing the particularities related to the CIBIL score and other related terms, borrowers should also know how the disbursal process for the personal loan works.
Also, adhering to the eligibility criteria and submitting the right documents will help borrowers reap the benefits of exclusive pre-approved offers extended by leading financial institutions on financial products like personal loans, business loans, credit cards, etc. These offers streamline the application process and save time. Willing borrowers can check their pre-approved offers by submitting their names and contact details.
Though a low credit score affects the loan application process, it does not always lead to the rejection of loan applications. Hence, by adopting the parameters mentioned above, borrowers can avail personal Loan for CIBIL Score of 550 and work on improving the CIBIL score to avoid future hassles.
