With a bad credit score, getting a personal loan from banks and other financial institutions becomes difficult. This is because lenders assess the risk of lending money to someone based on their credit history or a standard measure of trustworthiness known as a credit score. A low cibil score for an instant loan may indicate that you are not likely to repay your loan or that you’ve had trouble keeping up with your payments in the past. Thus, getting a cash loan without caring about the cibil score may seem impossible at first glance. But, it is not so! Keep reading to learn more about how the cibil score works and how you can take an instant loan with a low cibil score:
What is a cibil score?
A credit or cibil score is a 3- digit number between 300 and 850 that indicates the likelihood that you will pay back a loan. Lenders assess your credit history to decide whether to extend your credit and what interest rate you will be offered. Your credit score relies on the data in your credit report. Your credit report includes information such as your payment history, the debt amount, and how long you’ve had a loan.
How are credit scores calculated?
Credit scores are calculated based on the data available in your credit report. Credit bureaus compile this information, and it includes information such as:
- How many times you’ve applied for credit,
- How many open accounts do you have,
- Payment history,
- Amount of debt,
- Length of credit history,
- New credit,
- Types of credit used,
- Delinquent accounts,
- Bankruptcies, and
Why does Your Cibil Score Matter for availing of a personal loan?
By mandating the Credit Companies (Regulations) Act in 2005, the government emphasised individuals’ credit history to avoid any financial frauds and assure loan repayments by debtors. RBI guidelines state that a person’s CIBIL score must be considered before any credit is granted. A low cibil score may make it difficult to get a cash loan. You might be denied the loan or offered a higher interest rate if you have a poor credit history and a low credit score.
Factors that affect the cibil score:
Here are a few things that may affect your cibil score:
- Repayment history: Having accounts that are past due or in collections will lower your score.
- Loan default: Incapacity to repay a loan and become a defaulter can drastically reduce your score.
- Amount of debt: Borrowing up to the maximum available limit can hurt your score.
- New credit: Applying for a lot of credit in a short period will affect your score.
- Multiple credits exhaustion: Using different types of credit, such as loans or credit cards simultaneously, will ruin your score.
How to Improve Your Cibil Score Quickly?
Here’s a list of things that are crucial for improving your cibil score: – Pay off your loans:
1) Low credit score Implies low net worth. Your net worth includes investments, cash, and house loans. Consider taking out only the loans you need and skip the unnecessary ones.
2) It is crucial to pay off your loans as fast as possible or at least on the due date. This will reflect positively on your cibil score and help you get a lower interest rate on your next loan. According to CIBIL, a late payment might trigger a 100-point credit score reduction.
2) Having a budget will help you avoid being late on your payments. All commitments and payments must be paid before the grace period ends. If you consistently miss payments, your credit rating will worsen, affecting your loan eligibility.
4) Having a cibil score lower than 650 is not a big deal. But, if you have a low cibil score, you must check your credit report and remove any incorrect information. Your credit score could plummet if you don’t monitor it.
The Best Ways to Get a Cash Loan with Bad Credit:
You must remember this while attempting to get a low cibil score instant loan. If you have a low CIBIL score, it means your possibilities of getting a personal loan are little to none. However, few lenders are willing to offer you a cash loan with bad credit. After convincing and availing of the loan, borrowers must focus their efforts on raising their CIBIL score and earning the confidence of their lenders by paying off their EMIs on time. You need to have a plan to avoid falling behind on your payments.
How To Avail An Instant Loan Without Cibil Score?
Receive a personal loan with no CIBIL score is lender-specific. When applying for an instant loan without cibil, win the lender’s trust. You require work stability or sizable income. Keep a check on your end-of-month financial transactions. If you have these things, chances of personal loan approval based on background and job/business stability increase.
Other ways to get a cash loan with bad credit:
1) Get a guarantor/cosigner: A guarantor will be responsible for your loan if you cannot pay it. They can help you get a loan with a lower interest rate because the guarantor’s credit history will be considered.
2) Use collateral: Taking a collateral-backed loan against an asset you own can be a good idea if you have bad credit. You can use your home equity to get an instant loan with a low cibil score.
3) Non-financial Banking companies: You can apply for an instant loan without cibil with a reputed non-financial banking company. These loans are more accessible than commercial bank loans. Many NBFCs don’t require paperwork or CIBIL scores for rapid personal loan distribution.
A bad credit score doesn’t mean you’re out of options when getting an instant personal loan for a low cibil score. Many lenders are willing to offer you a cash loan with bad credit. All you need to do is select the right lender, have a plan in place, and follow these tips to improve your cibil score quickly. You can get the loan you need and improve your financial situation with a little effort.