How to get loan with a low CIBIL score or no CIBIL score: Loan against security, co-applicant, guarantor, P2P lending platforms

Worried about not getting a loan due to low or no CIBIL score? Relax! Here are some suggestions to get a loan.

Have a low CIBIL score or don’t have one at all? You can still get a loan!

Most of us have heard that a CIBIL score of 750+ is a must to get a loan. But does this mean people with a low or no CIBIL score are not going to get any loans? Absolutely not! In this article, we will discuss some ways of how to get a loan with a low CIBIL score (or without a CIBIL score).

What is a CIBIL score?

A CIBIL score is a three-digit numeric summary of your credit history. The score ranges between 300 and 900. The higher the score, the better the chances of your loan getting approved. While calculating your CIBIL score, the following parameters are taken into consideration:

  • Payment history: If you make all your loan repayments on time, it contributes to increasing your credit score. Any repayment delays or defaults impact your credit score negatively.
  • Credit utilisation ratio: Suppose you have a Rs 1 lakh credit limit on your credit card. If you have utilised Rs 20,000 of this limit in a particular billing cycle, your credit utilisation ratio is 20%. In a billing cycle, the credit utilisation ratio up to a specified limit is looked at favourably for your CIBIL score calculation. The moment your credit utilisation ratio goes above the specified limit, it impacts your credit score adversely.
  • Credit mix: This parameter considers your mix of secured loans (home loan, vehicle loan, etc.) and unsecured loans (credit cards, personal loan, etc.). A balance of secured and unsecured loans impacts your CIBIL score positively. If you have only secured loans or only unsecured loans, or the proportion of one types of loans is higher than the other, it impacts your CIBIL score negatively.
  • Loan enquiries: This parameter considers the number of loans and credit card enquiries you have made during a specified period. For example, if you have made multiple enquiries for loans and credit cards in a short period, it impacts your credit score negatively.


Related: Taking Charge Of Your Credit Score

How to get a loan with a low (or no) CIBIL score 

Next, let us try to understand how someone with a low or no CIBIL score can get a loan. If you have a CIBIL score below 750, or no CIBIL score at all, you can take the following steps to get your loan approved

Apply for a loan against security

If your low or no CIBIL score is a challenge in getting a loan, consider taking a loan against security or collateral. If you have any security like a bank fixed deposit, National Savings Certificate (NSC), shares, mutual fund units, gold, insurance policy, etc., you can offer it as collateral against the loan. A loan against security is the easiest way to get a loan if you have a low or no CIBIL score.

Use your credit card and convert the outstanding into EMIs

If banks and financial institutions are not considering your loan application due to low or no CIBIL score, you can fall back on your credit card (if you have one). If you have a credit card with a high limit, use it for the purpose for which you need the loan. Later, you can convert the credit card outstanding amount into EMIs and repay it on a monthly basis. If you intend to try this option, remember that the interest rate may be slightly higher than what is charged by financial institutions for personal loans.

Get a co-applicant

You may make a joint application for the loan. Make sure the co-applicant has a good CIBIL score and adequate income. The financial institution will look at the creditworthiness of the co-applicant and approve your loan. The co-applicant can be your immediate family member or someone else.

Get a guarantor

You can also explore the possibility of getting a guarantor if you want to make a solo application. A guarantor is someone who pays the outstanding loan in case the loan applicant fails to repay it. The guarantor can be your immediate family member or someone else. The presence of a guarantor will definitely boost your chances of getting a loan approved.

Related: Do you know these strategies to improve your credit score?

Mention regular income and additional sources of income, if any

Some lenders may look beyond the CIBIL score while considering loan applications. Your loan application may be considered despite the low or no CIBIL score, if you:

  • Have a government job or stable job in a reputable company
  • Have been with the same company for more than 6 months or one year
  • Draw a salary that is deemed adequate to service the EMI

If you have any other additional sources of income, that will further boost your chances of your loan application getting approved.

Apply for a loan with a smaller amount

The lender will look at your debt-to-income (DTI) ratio. The DTI measures the percentage of your monthly income that is going towards servicing EMIs. The lower the DTI, the better your chances of a loan getting approved. If you have a low or no CIBIL score, the lender will check your DTI. 

If you don't have any existing outstanding loans, and after considering the current loan application, if your DTI is significantly lower, the lender may choose to approve your loan. Despite the low CIBIL score, if the lender is convinced that you will be able to pay the EMIs comfortably, you may get your loan application approved.

Check out other sources like P2P lending platforms

If banks and NBFCs turn you down, you may consider making a loan application on a peer-to-peer (P2P) lending platform. These platforms bring borrowers and lenders/investors (individuals like you and me) together. Some well-known P2P lending platforms include Faircent, i2iFunding, Lendenclub, etc. Even with a low or no CIBIL score, the chances of a loan getting approved with a P2P lending platform are higher than with a bank/NBFC. 

Related: All you need to know about obtaining your credit report

Approach a fintech

You can consider a fintech like EarlySalary, Navi, etc., that is open to giving loans to people with low CIBIL scores or first-time borrowers with no CIBIL score. These companies consider hundreds of data points (of which CIBIL score is just one parameter) before deciding on the loan application. They have their own scoring mechanism based on the analysis of the data points. If your score is higher than the cut-off, your loan application will be approved.

Last words 

A low or no CIBIL score can be a challenge, but it cannot stop you from getting a loan. You have many options to get your loan approved despite a low or no CIBIL score. If you have an upcoming event like marriage, birthday, or festival celebration, and you need a loan, don’t let the low or no CIBIL score stress you out. Just follow the above suggestions, and you will surely get your loan approved. Go ahead and enjoy the celebration.

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