How to Apply for a Personal Loan with Low Credit Score

If you have a low credit score, getting a personal loan through banks might not be easy. Your credit history is the vital factor on which lenders assess your creditworthiness. However, even with a bad credit score, you can still find personal loan facilities online.

Your credit score and loans

Your credit score indicates your track record in keeping up with your financial commitments. Most often, CIBIL score is considered. Your score is based on whether you have been regular with your payments or defaulted on loans and card dues. Lenders look at your credit score when they process your loan application. This is how they check whether you can be trusted to repay the loan on schedule. 

Most banks look for high credit scores for unsecured personal loan. They will generally reject applicants with a score of less than 750. Lower scores indicate that you might have defaulted on past loans, been irregular with EMI payments, or borrowed too many loans.

Can you get a Personal loan with low credit score?

Yes, there are other ways. For instance, NBFCs are not quite as strict as banks when it comes to credit scores. They might be willing to extend loans to people with less than perfect scores. There are other channels like peer-to-peer lending that can consider your case. If the lender trusts you despite your low CIBIL score, you can get a loan.

Check eligibility for peer-to-peer loans provided through online lending platforms. These lending channels look at factors like your current salary, your investments, your future prospects, and educational qualifications. If they ignore your credit record considering your current circumstances, they can give you a loan at reasonable rates.

You can get this online loan quickly. This is provided you can prove that your current status makes you an attractive candidate, despite your low CIBIL score. The lending platforms provide you with an easy application process. They connect you with potential lenders who are willing to lend to you. 

Even with banks, you only need to convince them that you have made efforts to correct your borrowing patterns and repayment records. If they believe that you are in a better financial position now, you may be able to get a loan. However, this might be a lower amount at a higher rate of interest.

You can also get a joint loan with your spouse or a sibling with better credit scores.  Finally, you can try to get a secured loan first, to tide you over your current emergency.

How to improve credit score

Once you get a loan through any of these channels, focus on using the loan as an opportunity to improve your credit record. 

Start out with a plan, don’t borrow more than you need. Keep aside enough funds each month to pay the monthly EMIs on time. Meanwhile, also focus on paying off your credit card dues on schedule. 

Once you clear your current loan, your CIBIL score will be updated. It will likely go up because you have been disciplined in keeping up with your loan and card dues. Next time, you can apply for a Personal Loan and be more confident of getting your application approved.