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How To Get A Personal Loan With A Low CIBIL Score?

mahindra-finance-author

by Mahindra Finance

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February 5, 2024

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3 mins read

Having a low CIBIL score can make it challenging to obtain a personal loan. A low credit score indicates that you may have had some difficulties in the past with financial management. Lenders are often cautious about providing loans to individuals with a low credit score as they perceive them as high-risk borrowers.

However, if you are in need of a personal loan despite having a low CIBIL score, there are some strategies you can employ to increase your chances of approval. Let's explore them further.

1. Assess your credit report:

The first step towards improving your chances of securing a personal loan is to understand why your credit score is low. Obtain a copy of your credit report and carefully examine it for any errors or discrepancies. If you notice any incorrect information, raise a dispute with the credit bureaus to rectify them.

2. Pay off existing debts:

One of the most effective ways to demonstrate your creditworthiness is by paying off your existing debts. Clearing any outstanding loans, credit card balances, or unpaid bills will reflect positively on your credit report and gradually help to improve your credit score.

3. Show stable income:

Lenders often consider your income stability when assessing your loan application. If you have a stable job or a consistent source of income, it will greatly increase your chances of getting a personal loan. Make sure to provide all relevant income-related documents such as salary slips, bank statements, and IT returns to support your application.

4. Opt for a secured loan:

If you are unable to secure an unsecured personal loan due to your low credit score, you can consider opting for a secured loan instead. In a secured loan, you pledge an asset such as your home, car, or fixed deposit as collateral. By offering collateral, the lender's risk is mitigated, and they may be more willing to offer you a loan despite your low credit score.

5. Apply for a joint loan: 

If you have a trusted family member or friend with a good credit score, you can apply for a joint loan. Having a co-borrower with a higher credit score improves the chances of loan approval as the lender considers their creditworthiness as well. However, it is important to keep in mind that both parties are equally responsible for repaying the loan.

6. Look for alternative lenders:

Financial institutions usually have stringent lending criteria, making it difficult for individuals with low credit scores to qualify for various types of loans. However, there are alternative lenders such as online lending platforms that specialize in providing loans to individuals with lower credit scores. Conduct thorough research and explore such options before applying for a personal loan.

Remember, improving your credit score takes time and consistent effort. It is crucial to manage your finances responsibly and make timely payments to gradually rebuild your creditworthiness. Maintaining a good credit score not only increases your chances of getting a personal loan but also enables you to access better interest rates and more favourable loan terms in the future.

In conclusion, while obtaining a personal loan with a low CIBIL score may be challenging, it is not impossible. By carefully analyzing your credit report, paying off existing debts, showcasing stable income, considering secured or joint loans, and exploring alternative lenders, you can increase your chances of obtaining a personal loan even with a low credit score. Keep working towards improving your creditworthiness, and soon, you will be on the path to financial stability.

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