If you have been late in paying your bills or piled up a mountain of debt, it may have put a dent in your Credit score.Now if an emergency expense crops up or you want to consolidate your debt, a personal Loan may can prove to be great alternative; your low credit score is likely to impact the interest rate you pay.
Trying to get a Personal Loan is an easy drill for most of us in any situation but nightmarish if the loan applicant has low credit score or poor CIBIL score – it promises to be a hellish experience as applicant with low credit score are not entertained. Low credit rating effectively ruins your chances of getting a personal loan from a bank or a private financial institution because they view you as a bad egg, someone who might default on their repayments and can turn into a bad investment for them. They base is purely on your history and a theoretical approach to credit assessment.
Some Common Signs Of A Low Credit Score Include:
- You are paying higher interest rates than you see it has advertised
- History of late payments for housing, electricity or other monthly bills
- Your bank account is overdrawn on a regular basis
- Have stopped trying to pay down debt and are satisfied making minimum payments on high interest credit cards
- You are facing problems getting a lease for housing
- Individuals are not approached for any sorts of contracts/schemes offered in the market
If You Are Out There To Shop For A Personal Loan With Low Credit Score
You Need To Keep In Mind These 5 Things
1.Credit Errors Of Your Credit Report
Before you ahead and apply for the personal loan, you need to take a detailed look at your low credit score. The errors in your credit score may play a culprit in rejecting you a personal loan. With you credit score report; you will know exactly where and how your credit score has dipped.
If you happen to find the errors in your credit score; you have a chance to correct them before you apply for the personal loans. You can state the errors within your report to CIBIL by raising “Dispute Resolution Process” which ensures to give you a thorough check on your credit score and rectifying the errors if any.
2. Private Lenders Too Offer Personal Loans
Armed with low credit score, when shopping for a personal loans don’t assume that your loan application to get rejected. Many people with low CIBIL score get their personal loan financed from private financial lending institutions like LoanTap, TATA Capital, IndiaLends, Bajaj Finserv, Fullerton etc.
It is easy to assume that they wouldn’t qualify for the loan with low credit score; but approaching private lenders you might get a better rate of interest on favorable terms.
3.With Low CIbil Score ; A Personal Loan Will Cost More
Yes it is true. You are not offered regular rate of interest pitched to other customers with good or high CIBIL scores. The banks as well as lenders will hesitate in giving you competitive rate of interest because of low credit score. Also; the loan amount may not to be the one you are looking for. For e.g. if you have applied for 2 Lakh personal loan, the lenders or banks may disbursed 1.5 Lac or less.
Also; the loan tenure is kept short with high rate of interest to pay back the loan.
4. The Fine Print Says Something Different
Whether you receive a loan disbursement mail or find a local private financial lender offering personal loans for low credit score, be sure to read all the details. There has been several such examples, where people suffering from poor credit score have given different rate of interest and not the one they had advertised earlier.
It’s a trick of showing rates with “Starting at ….” which lures the customers into the trap. Ensure to read the fine print that shows the real rate of interest offered to you which is way much higher than the usual ones.
Some lenders/banks are seen charging origination fees of the value of the loan.
5. Applying Online Is Good Alternate Source
It is believed that people suffering from poor credit score can get a positive response by applying loan online. There are good numbers of lenders and banks approving instant personal loans even though you have a bad credit score. With bare minimum requirements to submit in loan application, it really makes it easy for a loan applicant to get instant persona loan approvals.
Also; there is less of fuss such as loan executive asking the purpose of getting persona loan. It minus the stress that one goes through in submitting documents.
How Lenders/Banks Assess Your Creditworthiness
They also match your data up against similar data from thousands of your past loans and the industry in general, which gives them an ability to approve your personal loan even if you are tagged under “low credit score“.
- Net salary
- Overall expenses trends
- Locality of where you stay
- Educational qualification
- Utility and mobile bills
- Asset holding, Investments,
- Credit card bills
- Online spending behavior
This approach ensures that individuals with a less or poor CIBIL score are also likely to get a personal loan through these platforms if they are credit worthy as their psychometric algorithm generates a more holistic credit profile of the borrower.
This does not take away from the importance of maintaining a good CIBIL score, all efforts must be made to try and maintain a good CIBIL score. But in the event that does not happen, or takes too long to happen, we are here to help you out in your times of need as this will also improve your CIBIL score.
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