The Credit Information Bureau (India) Limited (CIBIL) is one of the four credit information companies licensed by the Reserve Bank of India. The CIBIL score is the most popular credit score in India. The credit rating agency derives the CIBIL score from assessing your creditworthiness. It is a three-digit numeric score ranging from 300 to 900. It is calculated based on your overall credit history across several institutions. It is difficult to take a loan without a credit score.
Did you know? Your CIBIL score is made up of four factors and each of them have a weightage.
How Do Banks Approve Loan?
Loans taken by people in the past, credit cards, regularity in repayment of loans, over utilization of credit limit, default or delay in repayment of the loan are factors that influence your credit score. If you have never taken a loan or never availed credit facility, then you will not have a CIBIL score. Banks consider CIBIL score to analyze your capability to repay loans. If you have an excellent CIBIL score, your loan application process is more likely to be approved. Generally, a score of more than 700 is considered to be good. Banks will likely reject your loan application if you have a low CIBIL. You cannot take a personal loan without a CIBIL score. However, you can still apply for instant loans without CIBIL by providing evidence of your source of income and creditworthiness.
Also Read: Types of Loan - What are different Types of Loan in India?
How To Get Loan Without CIBIL Score?
Payment history is the most important factor impacting CIBIL score in a positive way or negative manner. The following are list of ways to get a loan without CIBIL Score:
1. Apply for an NBFC loan without CIBIL Scores
If you have a poor credit history or a low credit score, you can approach Non-Banking Financial Companies. The NBFCs follow comparatively relaxed loan policies. You can get a loan without a CIBIL check from NBFCs. The NBFCs are institutions that work like a bank but do not have a banking license. The non-banking finance companies cannot accept demand deposits from the public but can provide loans. You can get a loan from NBFC to meet your short-term fund requirements. However, the rate of interest these institutions charge for providing loans without CIBIL can be high.
2. Apply for loans with collateral security or mortgage
The main reason why banks refrain from granting loans to borrowers without a credit score or a low CIBIL is that the banks cannot assess their repayment capability. The banks consider such loans as riskier. But if you present your loan application with adequate security against the loan amount, your loan application is likely to be accepted. You can get loans by providing your property or gold as collateral to the bank. The lending bank can ignore the low credit score and allow a loan without a CIBIL score if it finds that the loan is backed by adequate security. The banks can exercise their rights on the collateral security if you fail to repay the loan amount with interest.
3. Joint loan or a loan with a guarantor with a good credit score
If you do not have a CIBIL score or a low CIBIL, you can apply for a joint loan from the bank. You can make the loan application with a co-borrower or guarantor with a good CIBIL score. The co-borrower can be your spouse, parent or family member. The availability of a co-borrower with good CIBIL reduces the risk of default. The bank may consider accepting your loan application because even if you fail to repay the loan, the guarantor or co-borrower can be held liable for the repayment of the loan.
4. Prove creditworthiness through income proof
If you are making a loan application for the first time and do not have a credit history, you can apply for a loan with valid income proof. Your salary slip, income tax returns, profit and loss statement if you run a business, and tax deduction at source (TDS) certificates can be valid proof of your income. Banks will likely provide you with an instant loan without a credit score if you submit adequate proof of income. The loan policies vary from bank to bank. The bank can sanction a loan after assessing your earning capacity, income stability, job profile and location.
5. Small loans from online finance providers
You can apply for small loans from online finance providers to meet your short-term fund requirements. Online lending platforms offer instant loans at a higher interest rate. You do not have to cut off your general expenses to meet your immediate fund requirements, as you can apply for small loans without CIBIL on online lending platforms. You can get without CIBIL loan for several purposes like a wedding, education, medical needs, etc.
6. Peer-to-peer lending
The P2P service provider acts as a bridge to connect the lenders who have adequate funds and the borrowers who need funds. The borrowers can apply for a loan on the P2P online portal. The P2P service provider will examine the borrower's loan application and credit-taking capacity and assign an interest rate according to it. After the approval of the application, the borrower can choose from the lenders willing to offer funds and evaluate the options. Borrowers with low or no credit scores can apply for instant loans from P2P. At competitive interest rates, individuals can get a personal loan without a CIBIL check from P2P lenders.
Also Read: How to Apply for the Best Business Loan in India? - Types of Govt. Loan Schemes
Good Credit Score And Its Importance
- A credit score below 550 is considered to be low. The banks hesitate in forwarding loans to borrowers with low credit scores.
- A score ranging from 550 to 700 is considered an average score. The banks may accept the loan application of borrowers with a credit rating within this range after some inquiries and terms and conditions.
- A score above 700 is considered a good credit score. If you have a credit rating in this range, your loan applications will likely be approved quickly. A credit rating from 700 to 900 shows that you have a reliable credit history, possess better repayment capability and have followed a disciplined credit approach in the past.
Personal loan for CIBIL score of 550
When your credit score is between 650 and 749, lenders may decide to give you a loan after learning more about your other financial circumstances. However, the minimum CIBIL score necessary for a home loan is often 650 and scores between 550 and 649 are considered ordinary and needs improvement.
A score of 550 to 600 is typically regarded as poor and considered insufficient to meet the requirements for personal loans. As a result, getting a personal loan with a CIBIL score of 550 is challenging.
Personal loans are collateral-free loans due to which the bank checks the applicant's credit score before accepting the loan application. There are several disadvantages of applying for a personal loan without a adequate CIBIL score.In many cases ,in such situations you may have to pay interest at higher rates, and the bank might approve a lesser amount than the actual loan amount requested by you because of a low CIBIL score.
As an alternative mean,you can also approach the NBFCs, online loan providers, peer to peer lenders for personal loans of small amounts as they do not check for CIBIL scores and usually lend out the amount in cash.
Also Read: Top 5 Government Loan Schemes for Small Business in India
Ways To Improve Credit Score
To create a healthy credit history, you should plan your credit procurement and repayments wisely.
Here are some ways to improve and maintain a good CIBIL score
- You should avail of a credit card facility to build a credit history
- Make timely payments of credit card dues
- Repay the EMIs or instalments of loans taken by you as per the repayment schedule without delay
- Avoid default and delay in repayment of your dues
- Check your credit reports regularly to identify any errors or mismatch in your credit data
In a nutshell, It is possible to get an instant loan without CIBIL. The banks consider the credit rating before accepting the loan, but it is not the sole criterion for approval or rejection of a loan application. The banks can assess the credit-taking capacity of the borrower based on other parameters such as source and stability of income. You can also explain to the bank authorities the reasons for no credit history. However, you should maintain a fair credit score to get hassle-free financial assistance from the bank whenever required.
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