Since obtaining a personal loan is one of the most common ways to borrow money, many individuals believe that a low credit score displayed in their free cibil report prevents them from obtaining a personal loan. However, that’s not the case.
In addition to knowing how to increase your credit score, the following advice will help you obtain a personal loan for low salary and/or despite poor or no credit:
Borrow less amount as a loan
Besides your credit score, banks also consider your income and existing debt when determining your eligibility for an instant loan without cibil. The appropriate loan amount is then determined based on the lender’s evaluation of the applicant’s credit risk and credit history. Now, if you have a poor credit score or none at all and are learning how to raise cibil score, obtaining a loan for a smaller amount tends to reduce the level of credit risk for the bank, which increases the likelihood that you will be approved for the loan. This is due to the perception that candidates with low credit histories, as reflected in a free cibil report, are less trusted. Therefore, obtaining a loan for a smaller sum can boost your chances of qualification and approval.
Get in a co-applicant
When attempting the necessary steps for how to improve cibil score, keep in mind that lenders giving personal loan for low salary are uncertain about an applicant’s ability to repay the taken loan, so they tend to often require either a guarantor or co-signore/applicant to increase the likelihood that the loan will be approved rather than simply denying the application. As a low credit score can hinder your chances of obtaining a loan, looping in a guarantor or co-applicant with sufficient income and a good credit score displayed on a free cibil report can boost your chances of obtaining a loan and may make you more suitable for a loan in general. The guarantor or co-applicant is equally liable for repaying the loan; the lender has a larger safety net and is, therefore, able to approve the loan. However, if you loop in someone for your instant loan without cibil, keep in mind that if you fail to repay the loan on time, it will negatively affect not just your credit score but also theirs.
If banks refuse, consider NBFCs and fintech
In contrast to banks, which would reject your loan even if you take steps to improve your credit score, fintech and NBFCs have less stringent standards for considering a personal loan for low salary applications. This makes it easier for bank-rejected individuals to obtain loans from these institutions. If you need a loan but happen to have a poor credit profile, you can approach an NBFC rather than a bank. The likelihood of obtaining a good personal loan from an NBFC is greater than that of a bank. However, NBFCs and Fintechs typically demand greater interest rates when compared to banks.
Accept an expensive interest rate in the beginning.
Since a solid credit score in your free cibil report is becoming increasingly vital for obtaining a personal loan, its function has expanded beyond determining eligibility. Lenders have begun basing interest rates on the credit score of loan applicants. This means that those with poor credit will pay a higher rate of interest on their loan. Since loan applications from individuals with poor credit are frequently denied, paying a relatively higher interest rate might still be preferable to be denied multiple times.
However, before committing to a loan with a high interest rate, you may choose to examine other loan offers depending on your monthly income, credit score, and other qualifying requirements. Ensure that your EMI-to-income ratio, inclusive of the additional EMI, does not exceed 50–60% when determining the EMI for the instant loan without cibil. Consider a longer term to reduce your payments, and strive to pay off the loan early to reduce the total interest you pay.
Also, when your personal loan has been approved and disbursed, be sure to repay it responsibly, as this will assist your credit score in the long run, especially if you do not know how to increase cibil score. When your credit score is high enough, you can move to a new lender with a cheaper interest rate and more favourable service terms. The term for this is “balance transfer.” Considering that the balance transfer will be handled as a new loan application by the new lender, you should ensure that the amount you would save on interest is sufficient to cover the charges.
Now that you understand how to obtain a personal loan for a low salary despite a poor credit score, it can be prudent to also take the necessary actions to improve your credit score. Having a higher credit score will benefit your financial health in numerous ways.
Remember that if you fail to pay your bill of credit card or loan EMI timely or if you skip a payment, it will appear on your free cibil report and lower your credit score. Therefore, ensure that your loan payments are made timely and fully and that you never miss or delay EMI instalments. This would raise your chances of obtaining a personal loan in the future by helping you develop or improve your credit score over time.
One of the most significant things credit card users can do to maintain or increase their credit score when applying for an instant loan without cibil is to keep their credit usage below 30% of the limit possessed. This credit usage ratio refers to the percentage of your credit card’s overall limit that has been currently utilised. Credit bureaus reduce your credit score if your credit usage ratio exceeds 30%, as lenders typically interpret this as an indication that you wish to obtain more credit. If you frequently exceed this limit, ask your credit card company to increase it or obtain a new card. This will result in a higher total credit limit and a lower credit use rate.
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