Besides improving your chances of loan approval, it also helps you get a loan at lower interest rates and reasonable terms and conditions. However, building and maintaining a high credit score requires diligent financial planning. Sometimes, financial mishandling or unexpected expenses cause your CIBIL score to fall. For instance, if I have a low CIBIL score of 550, can I get a loan? Here is everything you need to know.
Can I Get a Personal Loan with a Low CIBIL Score?
You may get a Personal Loan for a CIBIL score of 550, but getting approval becomes challenging. Financial institutions often prefer lending to borrowers with high credit ratings, as they demonstrate a higher creditworthiness and financial stability. If you have a low credit score of 550, lenders may approve your loan but charge a higher interest for Personal Loan than usual. Remember that getting a loan rejection may negatively impact your credit rating, making it even more challenging to obtain credit in the future.If you are still looking for a personal loan with a low credit score, look for lenders specialising in working with poor credit borrowers. However, be ready to pay a higher interest rate and face fewer loan opportunities.
Factors that Affect Credit Score
The following factors may impact your credit score:
- Inconsistent repayment history, like delayed or missed payments
- High credit utilisation that demonstrates mismanagement of credit, leading to a lower credit score
- Multiple hard inquiries lead to decreased credit score
- Unhealthy credit mix with the same types of loans in the portfolio
- High outstanding balances can lower your credit score
- Issues in the credit report, like default or bankruptcy, will contribute to a low CIBIL score
Also, Read: How You Can Get A Personal Loan With Credit Score 600
Disadvantages of Applying for a Personal Loan with a Low Credit Score
If you are considering applying for a Personal Loan online, try improving your credit score first. Applying for a loan with a low credit score has several disadvantages, including the following:
- High-Interest Rates: A low credit score projects you as a high-risk borrower, causing lenders to compensate for it by charging you a higher interest for Personal Loan. That means you will pay a higher interest cost, making your loan costlier.
- Limited Loan Offers: Lending institutions may hesitate to approve your loan if you have a low CIBIL score. That means you will have limited loan offers at your disposal. As a result, you will be forced to settle for a loan plan with unfavourable terms and conditions.
- Higher Fees and Charges: Apart from higher interest rates, loan providers may also charge additional fees and charges, including processing fees, application fees, etc. These charges may add up quickly and make your loan costlier.
Few Tips to Improve Your CIBIL Score
Here are a few tips to improve your CIBIL score at the earliest:
- Repay all your EMIs and credit card bills in full and on time. It is an important step to increase and maintain a decent credit score. Clear your pending loans first before applying for new credit products. Consolidating loans will also help.
- Keep your credit utilisation ratio below 30% when using a credit card.
- Even with a high income, if you spend most of your income on other financial obligations, the lenders may hesitate to approve your loan application. Therefore, ensure your DTI ratio is lower than 30-40% to build a credit score.
- Never miss your credit card bills and EMI repayments. If your repayment plan has become challenging, contact your loan company to devise other solutions.
- Keep a combination of secured and unsecured loans in your profile to improve your credit score.
- Check your credit report regularly for any mistakes and discrepancies. If you find any, file a dispute to get them corrected immediately.
Also, Read: How To Get Instant Personal Loan For Low CIBIL Score?
Steps to Apply for a Personal Loan with a Low CIBIL Score
The steps to apply for a Personal Loan for a 550 CIBIL score are similar to a usual application procedure. These include the following:
Step 1: Visit the Hero FinCorp website or download the personal loan app.
Step 2: Check eligibility and determine a suitable repayment tenure.
Step 3: Fill out an online application form and submit the required documents.
Step 4: Receive loan approval via email and accept the loan offer.
Step 5: Get disbursal in your bank account within a few hours.
Conclusion
Please note while a low CIBIL score does not necessarily lead to loan rejection, it may result in a higher interest for Personal Loan and less favourable terms and conditions. Hence, improving your credit score before applying is crucial to getting the best deal. Applying with a co-applicant is another way of enhancing your loan eligibility.
Frequently Asked Questions
1. What is the lowest CIBIL score for a personal loan?
The lowest CIBIL score required to apply for a Personal Loan is around 700-750.
2. How does applying for a loan affect my credit score?
When you apply for a loan, the lender pulls a hard inquiry on your credit report, reducing the credit score by a few points.
3. What documents are required to apply for a personal loan with a low credit score?
Your identity, address, and income proofs are essential documents required for a Personal Loan online application process.
4. What types of personal loans are available for individuals with low credit scores?
All types of Personal Loans are available for low credit score individuals. However, the interest rates, loan amounts, and other terms and conditions may not be in your best interest.
Disclaimer: The information provided in this blog is based on research. The amount of a personal loan can vary based on your CIBIL score, with a higher score often enabling you to qualify for a larger loan amount with favorable terms.
