Loans for Low CIBIL Score
Personal Loans for low credit are an option for people whose credit reflects some financial missteps or people who haven’t had time to build a credit history. Bad/Low credit refers to a low credit score or a short credit history. Things like late payments or maxed-out credit cards can lower your credit score. Many lenders are hesitant to lend to people who have a low credit score as there is a higher risk of them defaulting on the payments. A low credit score is an indication of the low repayment capacity of individuals and hence, these individuals find it challenging to find a lender who will offer them a loan.
What makes up a Bad Credit Score?
FICO calculates your credit score using five pieces of information:
- Payment history: 35%
- Amounts owed: 30%
- Length of credit history: 15%
- New credit: 10%
- Credit mix: 10%
If your finances fall short in one or more of these areas, your score will drop. For instance, having a history of late payments will have a huge impact on your score, since payment history contributes the most to your score. Things like bankruptcies, foreclosures and high amounts of debt relative to your income could also result in a bad credit score.
Things to keep in mind before you availing Low Credit Personal Loan
Before you decide to availing bad credit loan, ensure that you bear the below-given points in mind:
- Do proper research and explore the benefits offered by various lenders. Choose a lender that offers lower interest rates.
- Before you apply for a bad credit loan, check your eligibility to ensure that your loan application does not get rejected as that may damage your credit score further.
- Go through the terms and conditions offered on bad credit loans thoroughly so that there are no surprises later.
- Evaluate your repayment capacity before you decide to apply for a bad credit loan.
How to get a Bad-Credit Personal loan?
Getting a personal loan with bad credit isn’t impossible, but it requires diligent research to find the most affordable loan possible. Here are a few steps to get a personal loan if you don’t have strong credit.
- Check your credit score: Learn where your credit stands by requesting a free credit report from com. You are entitled to one free credit report every year from each of the credit reporting agencies, though you can currently access weekly reports through April 2022.
- Ensure that you can repay the loan: Evaluate your home budget to make sure that you can support an additional monthly loan payment.
- Compare bad-credit personal loans: If you have an existing relationship with a bank or credit union and your accounts are in good standing, it may have a personal loan option for you. You can also research personal loans for people with bad credit online, but make sure to read the fine print and independent reviews about the lender.
- Take advantage of prequalification: Before you apply for a loan, many online lenders allow you to prequalify, or check whether or not you will qualify without doing a hard credit check. This is a good way to shop around for a bad credit loan without impacting your credit score further.
- Look into secured loans: Some lenders offer secured personal loans, which are often easier to get if you have below-average credit. These loans must be backed by an asset like your home or car, but they typically have lower APRs.
- Add a co-signer if necessary: Co-signers take on partial responsibility for the loan and may be required to repay the loan if they fall behind on payments. Adding a co-signer who has good credit could help you qualify and may net you lower interest rates.
- Gather financial documents: When applying for a loan, you’ll likely have to provide financial documents that include pay stubs, tax documents, and employment information. By gathering all of these documents in advance, you’ll speed up the process of acquiring your loan.
- Be prepared for a hard credit check: While you can get prequalified from many lenders without initiating a hard credit check, the actual application will result in a credit inquiry. A hard credit check can temporarily damage your credit, though you should be able to recover the points lost once you begin making payments on the loan.
How to increase your chances to Secure a Bad Credit Loan
- Prove that you can repay the EMIs – Despite your low credit score, lenders may offer you a loan if there has been an increase in your earnings. Hence, if you can communicate to the lender that your earnings have increased and you can afford to pay the EMIs, there are high chances of them offering you a loan.
- Provide collateral – Providing collateral increase your chances to secure a loan as the risk associated with lending to you decreases. Lenders feel confident to offer you a loan as in the case of defaults, they can sell/auction the collateral to recover the loan outstanding amount.
- Apply with a co-applicant – When you apply for a loan with a co-applicant who is creditworthy, your eligibility to secure a loan gets enhanced. So, when you have a low credit score and you wish to secure a bad credit loan, applying with a co-applicant is a good idea.
Top 5 Lenders for Low CIBIL Score
1. Omozing
Omozing helps make Smart Money Moves for a Lifetime. They strive to get lowest interest rates and best terms for your Online Applications at www.Omozing.com . Personal Loan Interest Rates starting from 0.8% p.m, and Loan amount ranging from INR 10,000 to INR 15,00,000. The Minimum and maximum repayment period ranges from 1 month to 48 months. CIBIL 600+ all company categories (including LLP, Self Employed, Proprietorship)
Personal Loan Eligibility and Documents
Documents Required
- KYC Proof
- Address Proof
(Valid Driving License / Valid Passport / Aadhar Card)
- 3 Month Salary Slip
- Passport Photo
- 6 Month Bank Statement
Eligibility Criteria
- Should be a full-time salaried employee with a minimum take-home salary of ₹ 15,000/month (OR)
- Should be a self-employed professional with an income of at least ₹ 15,000/month.(Only certain professionals like doctors, lawyers, or business owners qualify)
- Must be above 18 years and below 60 years of age
- Must be a resident of India or NRI with clear documentation
2. HDFC Bank Personal Loan
HDFC Bank is one of the premier banks in India with a wide variety of credit products to cater to all your needs. It offers personal loans to individuals with a credit score in the range of 600-700. The main features of the loan are:
- Easy Documentation with Door Step Service
- Faster processing and approvals
- Maximum tenure allowed is 5 years
Documents required
- Application form accompanied by Cheque for Processing Fee
- ID Proof
- For Salaried Applicants: Salary Slip for 3 months with bank statement for 3 months which reflect salary credit
- For Self Employed Applicants: Audited financial documents for previous 2 years, bank statement for 6 months, and proof of office address
- Address Proof
The Rate of Interest and Processing Fees
Interest Rate: 10.50% – 21.00% p.a
Processing fee: Up to 2.50% of the loan amount subject to a maximum of Rs.25,000
3. State Bank of India (SBI)
SBI offers SBI Saral personal loan customized in a manner that helps an individual meet varied kinds of personal expenses. The interest rates at which these loans are offered are quite competitive with no hidden costs or administrative charges, no prepayment penalties. It also comes with easy repayment term.
Eligibility for SBI Personal Loan
The eligibility criteria you will have to fulfil in order to avail this personal loan scheme are:
- You must have a salary account with another bank.
- Minimum and maximum age of eligibility for this scheme is 21 years and 58 years respectively.
- You must have a minimum work experience of 1 year.
- You must be drawing a minimum monthly income of Rs.15, 000.
SBI Personal Loan Details
Interest Rate – 9.60% p.a. onwards
Loan Amount – Up to Rs.20 lakh
Minimum Income Required –Rs.15,000
Loan Tenure – Up to 6 years
4. AXIS Bank Personal Loan
Axis bank’s personal loans are meant for salaried persons, self employed individuals and also professionals. The processing of the loan is simple with easy documentation and fast approval.
Axis Bank Personal Loans offer fast processing of your loan. Personal Loans can be used for plenty of purposes! They can be availed when you are planning a vacation, renovating your home or arranging a dream wedding for yourself or somebody special in the family. Now you need not postpone things on your bucket list! You can get a Personal Loan from Rs. 50,000 upto Rs. 15,00,000 with minimal documentation and speedy approval from Axis Bank. Also, you can transfer your existing high interest Personal Loan to Axis Bank as well. With a quick approval on Personal Loans, turn your dreams into reality!
Axis Bank Personal Loan Benefits
- Meet all your aspirations – Get assistance from Axis Bank Personal Loans and don’t let the need for money hold you back.
- Choose your amount – Get a Personal Loan between Rs. 50,000 to Rs. 15,00,000.
- Decide your tenure – The repayment tenure of your Personal Loan can range from 12 to 60 months.
- Calculate your loan EMIs – Calculate your Personal Loan EMIs to plan and achieve your financial aspirations by clicking hereTo Calculate your loan EMIs.
- Enjoy the best rates – Personal Loans starting at 10.49%
- Transfer existing loans – Move your existing high-interest personal loan to Axis Bank.
- Hassle-free Personal Loan – Application requires minimal documentation, and approval is speedy.
5. Fullerton Personal Loan
Fullerton India is an NBFC established in the year 2007 and since then have been catering to the credit needs of individuals and small businesses alike.
Features of Fullerton Personal Loan
- Amount up to Rs. 20 lakhs for salaried individuals and Rs 30 Lakh for Self-employed
- No security, no collaterals or guarantee needed
- Balance transfer of an existing personal loan possible
- Tenures ranging from 1 year to 4 years
Documents Required
- Application form with a recent photograph
- ID Proof – Passport Copy/ Voter ID card/ Driving License/ PAN Card
- Address Proof for Age-proof – PAN Card, Passport, any other certificate from a statutory authority
- Bank Statements (Bank statement / Bank Passbook for last 6 months) OR Last 3 months’ salary slip
- Form 16
- Income Tax Returns for last 3 years
- Processing fee cheque
- Previous 2 years’ experience letter without any gap (if current work experience < 1 year)
The Rate of Interest and Other Charges
Interest – 11.99% – 36%
Processing Fee – 0% – 6% of the loan amount
Ways of getting Personal Loans for Bad Credit
1. Prove that you can afford the EMI’s
Right after the credit score, it is income that is considered by the lender. One of the ways of getting personal loans for bad credit is by proving that you are eligible and capable of the EMI payments. If you are able to convince the lender that you have a regular and stable job, the chances for approval are higher.
2. Apply with a co-signer or secure a guarantor
Personal loans for bad credit can also be achieved with the help of a co-signer or guarantor. Applying with the help of a co-signer will make the lenders consider the co-signer’s credit score, thus improving your chances of approval. Similarly, securing a guarantor will increase the confidence of the lender that you will not default on your loan payments.
3. Pledge collateral
Another secure way of personal loans for bad credit is by pledging collateral. Collateral is just like a guarantor except it is an asset that is attached with the loan. On failure of payments, the lender has the right to sell the collateral and realise it to get back the loan amount.
4. Ask for a lower personal loan amount
If you have a poor credit score, the chances of approval for any kind of loan are less. However, personal loans for bad credit can be possible if you ask for a lower personal loan amount. This will further reduce the risk of borrower default as the lender has to give a lesser amount.
5. Correct the mistakes on the credit report, if any
A lot of times, errors and mistakes on the credit report can lead to a poor credit score, thus affecting credit possibilities. Check your free credit report online once a year to see if there are any errors or mistakes that you must report.
Alternatives to Bad Credit Loans
There are limited alternatives that you can consider before opting for a bad credit loan. These options are:
- Speaking to your current financial provider to offer you a tailored loan considering your circumstances. The current financial provider may be able to help you out in this regard than you going to a new provider for a loan.
- Credit unions that are community-operated can offer a real alternative to banks to those going through financial difficulty. You need to be a member of the credit union to avail of the loan. These organisations are supportive and their main intention is to serve their members.
- Credit cards are another option that is available to those with a bad credit history. There are dedicated cards for people with bad credit ratings. Though they may have lower credit limits or higher interest rates. Also, remember a failed application will damage your credit card further.
- The government also offers interest-free budgeting loans to those who can’t afford their rent. But those with urgent requirements only will receive the loan.
- Use your own savings for as long as you can. It is better to have used your saving than to pay the high interest that is being charged on loans.
- Turn to your family and friends for a loan. You can work out a mutually beneficial deal and they will be much more understanding than any financial body. You can agree on a feasible interest.