Managing to raise a loan with a poor CIBIL score can be tough, but it’s not impossible. There are a number of ways to do so.
For instance, you can opt for a smaller loan in the beginning. This can, at times, raise your chances of approval, particularly if your income can easily cover the payments. Banks are likely to be more willing to lend to a borrower with a poor credit score for a smaller loan.
Meanwhile, it is also important to work on improving your credit score. This can happen by paying all your bills on time, reducing your credit card balances, and refraining from applying for new credit unnecessarily.
Some strategies you may want to consider:
Apply for a secured loan: A secured loan is backed by collateral, such as your home, car, or savings. Banks may be more willing to approve a secured loan because they have something to repossess if you default.
However, keep in mind that defaulting on a secured loan can result in losing your collateral.
ALSO READ: How does a pre-approved loan influence your CIBIL score? MintGenie explains
Co-signer helps: If you have a family member or friend with a good credit history, you could ask them to co-sign the loan. Their good credit score may help offset your poor score, increasing your chances of approval. Just remember that if you default, the co-signer is also responsible for repaying the loan.
Online lenders: If traditional banks or financial institutions are unwilling to approve your loan application, consider alternative banks such as online lenders or peer-to-peer lending platforms. These lenders may have more flexible criteria for approval.
Sometimes, giving additional documentation, such as proof of income, employment stability, or assets, can help strengthen your loan application.
This extra information can give banks more confidence in your ability to repay the loan despite your low credit score.
However, it is imperative to examine different terms of a loan offer before you accept it, particularly if you have a low credit score.
Frequently Asked Questions:
How often should you check your credit score?
Most experts recommend to check the credit score at least once a year.
Is payment of debt enough to maintain a good CIBIL score?
Paying off debt is indispensable to maintain a good credit score. However, it is responsible financial management that leads to a good CIBIL score.
ALSO READ: CIBIL score on a decline? 6 key steps to follow to improve it
Why is it important to pay bills on time?
Payment history is a significant factor in determining your credit score. Even a single missed or late payment can negatively impact your score.
Does a high CIBIL score offer better rental opportunities?
Landlords may also check your credit score when evaluating rental applications. A high CIBIL score can, therefore, raise your chances of securing rental housing, particularly in competitive rental markets.
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Published: 10 May 2024, 05:21 PM IST