8 Things you should know before applying for a personal loan
The answer to the question Can I get a personal loan with a low CIBIL score? can be answered easily by going through this article. Here, we tell you everything you need to know before applying for a personal loan and we even break down your chances of getting the funds you need, depending on your credit history.
1) Unsecured loans require no collateral
If you’re having trouble getting approved for an unsecured loan with your bank, consider applying online. With an unsecured loan, you won’t have to put up any collateral (like a house or car), but these loans typically carry higher interest rates than secured loans do. Still, they can be helpful in dire situations like those outlined above. To learn more about borrowing money without collateral, read our guide here.
2) Banks have their own in-house credit scores, which is called the CIBIL Score
CIBIL stands for Credit Information Bureau of India. CIBIL scores are numerical values between 300 and 900, with higher scores representing greater risk potential. Although most banks don’t publish their scores, it’s possible to calculate your CIBIL score based on information in your credit report. The factors that make up your CIBIL score include: payment history, outstanding debt, number of accounts open over time and total amount owed on all accounts.
3) A bad score doesn’t mean you won’t be able to take out a loan
Your CIBIL score is calculated based on your credit report, which contains all of your past borrowing and repayment history. This history determines whether or not you’re creditworthy, but there are certain circumstances when even having a bad score doesn’t mean you won’t be able to get a loan. However, it could affect how much money you qualify for and at what interest rate.
4) Bad debt ratios can lower your chances of approval
Banks usually have pre-set limits on how much they’re willing to lend out, and a low CIBIL score might mean your bad debt ratios (the amount of money owed versus total credit limit) aren’t in line with what’s required. But good news: Applying for an unsecured personal loan can help you rebuild your score. An unsecured loan means there is no collateral backing it up—and that includes any existing home loans or car loans.
5) The number of loans impacts your approval chances
Your CIBIL score is directly impacted by your credit history, which means that if you are applying for multiple loans (personal or otherwise), it will affect your chances of approval. So even if a bank says that they don’t use CIBIL scores to assess new applicants, they may still ask to see all of your previous loans and CIBIL score. The good news? If you have already applied and been rejected, don’t give up hope.
6) Applying for multiple loans at once lowers chances
Multiple applications in a short period of time will make it appear as if you are overextending yourself. You want to give lenders confidence that they’re not giving money to someone who won’t be able to pay them back. This means keeping multiple loan applications separate and not submitting too many at once.
7) Loan providers vary on what they look at when deciding whether to approve your loan or not. Some look more closely at your income while others rely more on assets.
As mentioned earlier, income is a major factor that’s taken into account when assessing whether or not to approve your loan. If your income is steady and sufficient enough to support taking on extra debt then there shouldn’t be an issue getting approved. If you have assets like property, jewelry, stocks etc., then that could also help increase your chances of being approved as well since they can serve as collateral in case anything goes wrong with your loan.
8) What if my bank doesn’t lend me? Here are other things you can do if your bank turns down your application.
What if my bank doesn’t lend me? Here are other things you can do if your bank turns down your application. The first thing to keep in mind is that even though getting approved can be hard, it’s not impossible to get a personal loan with a low CIBIL score. Don’t let rejection by one bank demotivate you: You might get rejected once or twice, but there are plenty of lenders who will consider your application.