Can You Get A Personal Loan With A Low Credit Score?

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Checking your credit score before getting a loan has now become as essential as checking whether 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 a better interest rate for your pocket as well as getting the loan amount you want and vice versa.

Your CIBIL score refers to the credit score assigned by TransUnion CIBIL, one of the oldest credit reporting companies in India, which is commonly used by lenders. That is why credit score is often referred to as CIBIL score in India.

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

CIBIL Score Check is even more important when it comes to borrowing unsecured credit such as a personal loan. The best CIBIL score for a personal loan is considered to be over 750 out of a potential 900. This score assures lenders that you are creditworthy, which means you can be trusted to repay the loan without default. In contrast, the lowest CIBIL score required for a personal loan depends on the lenders, each with their own internal policy; however, experts suggest that 650 is the minimum score required for a successful personal loan application.

How do CIBIL scores and loan approvals relate?

Regarding CIBIL score, Indian lenders are cautious about granting loans to borrowers who do not meet ideal standards. Here is the percentage of penalties per score according to 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 the 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, whether your score is below 750 or below 650, you can still get an unsecured loan. Lenders offer CIBIL low score personal loan with certain conditions and all you have to do is comply with them to get the financing you need. These conditions generally revolve around your repayment capacity and your income. If you can show that you have the ability to repay the loan on time, you can also get a personal loan with a low CIBIL score. Keep in mind, however, that it is even more important that you meet the other lender eligibility criteria regarding your age, location, and monthly income.

Tips for obtaining a personal loan for candidates with low CIBIL

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

Stable employment with a reputable organization helps lenders view your loan application in a positive light despite a low CIBIL score, as it indicates financial capability. So submit your payslips for the past 6 months to reassure lenders that you will be diligent with IMEs. Here you can even showcase your investments as well as income from other sources, be it freelancers, rental income and more. All of this helps lenders understand that you can afford to pay monthly payments without missing due dates.

When you apply for a personal loan together with a spouse or family member who has a good CIBIL score of 750 and above, you can get approved even if your score is lower. Two applicants also means that the repayment responsibility is split between two people, which further reduces the risk from the lender’s point of view.

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

When you have a low CIBIL score, instead of an unsecured personal loan, you can apply for a loan secured by gold, FD or other investments, or by attaching real estate as collateral. This helps lenders bet on an asset in the event of non-repayment and also helps you build your CIBIL score in the event of a successful repayment.

While there are ways to build your CIBIL score, it can take some time. When you’re in a rush, another tip to keep in mind when you notice that your CIBIL score is low is to check your Credit Information Report (CIR), which you can download along with your score. See if there are any mistakes here that lower your score. For example, this report lists a previous loan that you may have already paid off in full as still open, or an IME that you have already paid is listed as past due. Correcting these errors can improve your score and you can initiate the dispute process directly from the CIBIL site.


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