In today’s world, financial needs can arise unexpectedly, be it for an emergency or a major expense. Often, securing a loan becomes a challenge if your CIBIL score is low. However, there is good news! Getting a loan with a low credit score has now become easier.
Understanding CIBIL Score and Its Importance
The CIBIL score is a numerical representation of your creditworthiness, ranging from 300 to 900. It reflects your financial health and repayment capability. A score above 750 is generally considered good, making it easier to secure loans. However, even individuals with a lower score can now obtain loans, thanks to newly introduced methods.
How to Secure a Loan with a Low CIBIL Score
Traditionally, banks were hesitant to offer loans to individuals with poor credit scores. However, the scenario has changed with the emergence of Non-Banking Financial Companies (NBFCs) and digital lending platforms. These institutions consider factors like income, employment stability, and repayment ability while granting loans. Small loans of up to ₹25,000 can be obtained without requiring any collateral.
Who is Eligible for a Loan?
Individuals earning a monthly income of ₹10,000 or more can apply for loans. This includes salaried professionals, self-employed individuals, freelancers, and small business owners. Proof of a steady income stream significantly increases the chances of loan approval.
Essential Documents for Loan Application
Applicants need to provide basic documents for loan approval:
- Aadhaar Card and PAN Card (Identity Proof)
- Bank Statement (Income Proof)
- Salary Slip (For Salaried Employees)
The entire documentation process can be completed online, eliminating the need for physical visits to the bank.
Eligibility Criteria for Loan Approval
- Applicant must be between 21 to 58 years old
- Must be an Indian citizen
- Bank account and mobile number should be linked to Aadhaar for verification and security purposes
Quick Loan Disbursal Process
One of the significant advantages of digital loans is the speed of processing. Once all documents are uploaded and verified, the loan application process can be completed within five minutes. Upon approval, funds are transferred to the applicant’s bank account within 24 hours.
How is EMI Determined?
Equated Monthly Installment (EMI) is set based on the borrower’s income and repayment capacity. Loan repayment tenure typically ranges from 3 months to 12 months, allowing borrowers to choose a repayment schedule that suits their financial situation.
Key Points to Remember
While obtaining a loan with a low CIBIL score is beneficial, certain precautions should be taken:
- Interest rates are usually higher, ranging from 18% to 36% per annum
- Timely EMI payments are crucial to avoid penalties and further decline in credit score
- Borrow only as much as required; assess your repayment capacity before applying
Ways to Improve Your CIBIL Score
Timely repayment of loans is an effective way to enhance your CIBIL score. Consistent EMI payments build a positive credit history, improving your chances of obtaining larger loans in the future.
Smart Loan Borrowing Tips
- Start Small: Begin with a small loan amount and ensure timely repayment to boost your credit score
- Compare Interest Rates: Evaluate loan offers from multiple NBFCs and digital lenders to secure the best deal
- Watch Out for Hidden Fees: Be aware of processing fees, late payment charges, and prepayment penalties
Final Words
The new lending framework has made it possible for individuals with low CIBIL scores to access loans easily. With the help of NBFCs and digital platforms, obtaining unsecured loans has become simpler and faster. However, borrowers should carefully evaluate their needs and repayment capacity to avoid financial stress. Responsible borrowing and timely repayment not only fulfill your immediate needs but also contribute to building a robust credit profile for future financial requirements.