Feb 28th 2024
Financial emergencies can happen to anyone at any time. A personal loan can be very beneficial in that situation. But frequently, a strong credit profile is necessary. It can be difficult to find oneself in a position where you require an urgent personal loan as a CIBIL defaulter. But fear not—there are several lenders like Investkraft that are dedicated to helping you get through these trying times. More than their credit scores, we value our consumers. We want to be your guiding hand on the path to financial recovery by offering a smooth personal loan application process. Check out this comprehensive information on obtaining a personal loan while having a low credit score.
What is CIBIL defaulter?
"CIBIL Defaulters" is not a term used in technical discourse. This phrase is incorrectly used to describe people who have bad credit scores from previous credit card bill or EMI defaults, as well as poor CIBIL and other credit scores. Candidates with low credit scores as a result of past defaults they have their names featuring in the CIBIL defaulter list carry very little chance of being approved for personal loans, as credit score is one of the primary factors used to evaluate candidates for personal loans. The following advice may be helpful to candidates with bad credit when applying for personal loans.
What is CIBIL and why it is so important?
CIBIL stands for Credit Information Bureau (India) Limited. It is India's first credit information company and is responsible for maintaining credit records of individuals as well as commercial entities. CIBIL collects and maintains records of credit-related information such as loan and credit card payments, outstanding balances, credit utilization patterns, and credit inquiries from various banks and financial institutions.
The credit information provided by CIBIL is used by banks, financial institutions, and other lenders to assess the creditworthiness of individuals and businesses before approving loans or credit facilities. CIBIL generates credit reports and credit scores for individuals based on their credit history, which lenders use as one of the factors in their decision-making process.
Having a good credit score from CIBIL is important for individuals seeking loans or credit cards, as it increases the likelihood of approval and may result in better terms and interest rates. Conversely, a poor credit score can make it difficult to obtain credit or may lead to higher interest rates and less favorable loan terms.
CIBIL plays a significant role in the Indian financial system by promoting responsible lending practices, reducing credit risk for lenders, and empowering consumers to make informed financial decisions based on their credit profiles.
If you are looking for an urgent loan for CIBIL defaulters, below are a few options that you can explore.
1. Explore offers from NBFCs
A growing number of NBFCs and modern fintech lenders are now providing personal loans to borrowers with subpar credit histories. They do, however, impose higher interest rates in order to offset the increased credit risk posed by these applicants. Therefore, those with bad credit should look beyond when applying for personal loans. To find the greatest deal on a personal loan, the best place to look is online financial marketplaces, which display offers from many lenders, including modern fintech lenders, based on the applicant's credit history, monthly income, and other qualifying requirements.
2. Make a joint application
Including a family member who is employed as a co-applicant lowers the credit risk for the lenders because the co-applicant has equal responsibility for the loan's prompt repayment. The likelihood of obtaining a personal loan can therefore be increased by including a co-applicant with a strong credit history and a sufficient monthly income. Adding a co-applicant with sufficient income can also aid in obtaining a larger loan amount, as the co-applicant's income is taken into account when determining the eligibility for the loan amount.
3. Show a good employment stability
Lenders assess personal loan applications based on a variety of factors, including the applicant's ability to repay the loan, job stability, and employer profile, in addition to credit score. Because of their increased income certainty and job stability, personal loan applicants who work for the government, MNCs, public sector organizations, and top or highly ranked private sector enterprises are typically given preference by the lenders. Because of this, some lenders may nevertheless accept these candidates' personal loan applications even though they have a history of bad credit.
4. Get a secured loan
If your bad credit continues to prevent you from getting a personal loan, you should start looking into the several secured loan choices that lenders are offering. Because the lenders can sell the collateral that the loan applicant submits in the event that the loan defaults, secured loans have a lower credit risk for them. Because of this, lenders now place less weight on credit scores when reviewing applications for secured loans. Applicants with low credit scores may find it easier to get personal loans if they choose one of the following secured loan choices.
- Gold Loan: The credit score of the applicants is not taken into consideration by the lenders providing gold loans. Therefore, in order to obtain a gold loan, individuals with low credit scores might use their gold jewelry as collateral with the lenders.
- Loan Against Property: To satisfy their financial needs, applicants who own real estate—whether it be residential or commercial—may choose to apply for a loan againstproperty. For borrowers looking for longer loan terms and greater loan amounts, this lending plan should be extremely beneficial.
- Loan Against Securities: Those who own investments in mutual funds, stocks, debentures, insurance policies, exchange-traded funds (ETFs), etc., may use these securities as collateral to get loans. The lenders' LTV ratios for these securities would determine the loan amount that was issued against them.
5. Include a Guarantor
Adding a loan guarantor lowers the credit risk for the lenders in the same way that co-applicants do, as the guarantor also assumes responsibility for loan repayment in the event that the principal loan applicant and any co-applicants default on the loan. When a lender is doubtful about the loan applicant and, if appropriate, co-applicant(s), their credit history, and ability to repay the loan, they typically request a loan guarantor.
The Conclusion
Make sure to periodically obtain your credit report after obtaining a personal loan or secured loan to fulfill your financial obligations. This will assist you in making the necessary corrections to raise your credit score. One of the options is to obtain free credit reports from all credit bureaus once a year, or you can visit financial markets such as paisabazaar.com to obtain free credit reports along with monthly updates.
FAQs
Q. Can a defaulter in CIBIL get a loan?
- Yes. The negative effects of default usually lessen after seven years, improving the chances of getting a loan. Approval is contingent upon both the borrower's overall creditworthiness and the lender's policies.
Q. How to improve the CIBIL score after default?
- The easiest and fastest way to improve your CIBIL score after a default is to clear off all your pending dues.
Q. Could I get my CIBIL score back?
- Refrain from taking on excessive debt all at once. Taking out several loans at once indicates that you are trapped in a harsh cycle of not having enough money. Your credit score will consequently decline even further. However, if you take out a loan and manage to pay it back, your credit score will rise.
Q. If my credit score is 500, can I still receive a loan?
- 500 is regarded as a low credit score, which makes it difficult to obtain financing. Nonetheless, those with poorer credit scores might have options from some lenders.
Related Posts;
