CIBIL Score: Can you get a personal loan with a low credit score?

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September 02, 2021 10:02 PM

Credit Information Bureau (India) Limited (CIBIL) is the organisation that maintains credit scores (CIBIL Score) on the basis of various criteria that affect credit worthiness.

Yes, personal loans are no-security loans, hence expensive. If you have any financial assets, like shares /mutual funds/ LIC policy (traditional)/bank FD, you may consider taking a loan against such an asset.Yes, personal loans are no-security loans, hence expensive. If you have any financial assets, like shares /mutual funds/ LIC policy (traditional)/bank FD, you may consider taking a loan against such an asset.

Taking loans or buying things on credit creates a financial burden on the concerned person, but people need to take loans, especially for big-ticket purchases of capital assets like a house, car or for higher education. So, it’s better to maintain a good credit score, so that whenever needed, a loan may be taken easily at an attractive rate.

Credit Information Bureau (India) Limited (CIBIL) is the organisation that maintains credit scores (CIBIL Score) on the basis of various criteria that affect credit worthiness.

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

“The ideal CIBIL score would be above 550 to get good interest rates and also be able to borrow a larger ticket amount,” says Raghuvir Gakhar, CEO, CashBean (P.C. Financial Services Pvt Ltd.).

How are CIBIL scores and loan approvals linked?

“The CIBIL Score works as a key underwriting decision factor for the lender, the higher the score, the better are your chances of getting a loan approved,” says Zafar Imam, CEO, FinShell Pay.

“CIBIL Score is a credit history summary, derived by using details found in the ‘Accounts’ and ‘Enquiries’ sections on the CIBIL Report. The Cibil score may vary from 300 – 900. The closer your score is to 900, the higher are the chances of your loan application getting approved. It also reflects any DPD (payment due) or settlement if any happened in any of the past accounts. This report helps in evaluating the financial character of the customer,” he further says.

When to borrow and how credit scores help in borrowing

Can you get a personal loan if you have a low CIBIL score?

“When you have a poor Cibil score, getting a personal loan might be challenging, especially from the mainstream lenders. CIBIL is one of the best way of assessing the credit worthiness of a customer. Since PL is an unsecured loan, CIBIL score becomes much more important for the lender,” says Imam.

“However, there are a lot of new age lenders who may offer Personal loan despite a low CIBIL score. They may charge a higher rate of interest, offer the loan for a lower tenor & lesser loan amount. There are many fintechs who are offering short term Personal loans in the range of 10k-50k. They may thus be a little more flexible in terms of accepting the low CIBIL score. These fintech companies also use some alternate data viz. reading the SMS of your mobile to assess your cash flow and credit behavior. A few fintech companies aim to offer personal loans to the consumers who are having low CIBIL score as they have specialized in this segment and have a robust credit evaluation method for such customers,” Imam further says.

Some tips on getting a personal loan for low CIBIL applicants?

“Digital lenders are the best option for low cibil borrowers to not just get loans but to also enhance their cibil score. Usually traditional banks would not give another look to people who might be new to the borrowing market or might have had a bad score due to a singular incident but through digital lending one can, step-by-step, through the process of borrowing and timely repayment can raise their scores. At the same time one should always try to start doing this by taking small ticket-loans instead of taking on something the individual will feel a lot of pressure and this is especially true with digital lenders who tend to give unsecured cash loans but at higher interest rates than banks,” says Gakhar.

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