Personal loans are among the most widely used financial tools to meet emergency expenses. You can use such loans to fund your dream wedding, home repairs, medical bills, higher education for your child, and more. Due to the high degree of flexibility offered by personal loans, their demand has significantly increased over the years. These loans are offered by several banks and non-banking financial companies (NBFCs) across India. These lenders will check many things, including your credit or CIBIL score, before deciding if they will lend you money.
Understanding the CIBIL Score
Credit Information Bureau (India) Limited (CIBIL) is one of the major credit information companies in India. A CIBIL score is a three-digit number ranging from 300 to 900. This number shows your creditworthiness, which basically indicates how likely you are to repay a loan on time. The higher your CIBIL or credit score, the more reliable you look to the lenders. Hence, banks and NBFCs readily grant personal loans to borrowers with high credit scores.
What Impacts Your CIBIL Score?
Your Past Loans: This includes personal loans, home loans, education loans, car loans and any other type of credit you may have availed.
Your Credit Cards: How many credit cards you have, how frequently you use them, and your spending limits.
Your Repayment History: Whether you have paid all EMIs and credit card bills on time or missed any payments.
How Often You Apply for New Credit: Submitting multiple applications within a short period of time can lower your score.
A high credit score indicates good payment history. On the other hand, a poor credit score or lack of a credit score can make you a high-risk borrower. If you have a high CIBIL or credit score, you shall be able to enjoy faster loan approval and lower interest rates. But this does not mean that you cannot get a personal loan without high credit scores. There are a few simple but effective tips that can allow you to avail personal loans without a CIBIL score.
Ways to Get a Personal Loan Without a CIBIL Score
Apply with a Guarantor
Even if you do not have a high credit score, applying with a guarantor who has a strong credit history can significantly improve the odds of your personal loan application getting approved. The guarantor would vouch for your repayment ability, and their credibility would offset your lack of credit history or low credit score. A guarantor should ideally be a member of your immediate family, like your parent, sibling or spouse. The guarantor must have reliable proof of income and a good credit score.
Apply for a Small Loan Amount
If you are new to borrowing and do not have a credit history, a smaller loan amount based on your income would be the best bet to avail a personal loan. A smaller loan amount shall allow you to demonstrate your repayment capability more efficiently. Moreover, lenders are more likely to approve loan applications for small sums, as the risk involved is lower. Repaying the smaller loan on time would help you establish a good credit history and high credit scores, enabling you to access larger loan amounts down the line.
Apply for a Collateral-Based Loan
Personal loans are typically collateral-free loans. But if you want to get a loan without a high credit score, you should consider pledging an asset as security. This reduces the risk of the lender, as the collateral can be liquidated in case of default to recover the loan amount. Collateral-based loans, like gold loans, are easy to obtain because the pledged gold serves as a reliable security.
These three ways mentioned above would allow you to get a loan without stringent credit checks and a high CIBIL score. Remember to choose a reputable loan provider for a safe and legal personal loan offer.