Common Pitfalls to Avoid When Applying for a Personal Loan with a Low CIBIL Score

We all have encountered added expenses on top of our regular lifestyle spends and trying to make do with our salary is not just an option anymore. In tough times like these, we need the support of extra funds and the opportunity to repay the said amount in equal parts in and around a stipulated period of time so that we don’t feel the burden of the debt. This is where personal loans come into the picture. 

For us to get a personal loan, lenders and banks look at a couple of things that make us eligible for the said loan amount and tenure. CIBIL score or a credit score is that scale that helps the lenders identify our repayment efficacy.

Before we understand what role our low CIBIL scores play in getting us an approval on personal loan, let us first go through the benefits of Personal Loan by Airtel Finance: 

1. Loan disbursal within 24 hours 
2. Flexible loan amount and tenure
3. Cashless, quick and 100% digital process

Understanding the Role of CIBIL Score in Personal Loan Approval

Our CIBIL score plays a significant role in personal loan approval. This three-digit number, ranging from 300 to 900, is a reflection of our creditworthiness and repayment history. Lenders use this score to comprehend and judge our ability to repay the loan. A higher score can lead to quicker approvals and better interest rates.

Also Read: Gold Loan vs Personal Loan

Common Mistakes When Applying for a Personal Loan with a Low CIBIL Score

When we have a low CIBIL score, it’s essential to avoid common missteps that could further hinder our loan approval chances.:

1. One such error is applying for multiple loans simultaneously. Each loan application triggers a hard inquiry into our credit history, which can lower our CIBIL score even further. 
2. Another common blunder is not checking our credit report for errors. Incorrect information on our credit report can negatively affect our score, so it’s crucial to review and correct these errors.
3. Third biggest mistake that can lead to a low CIBIL score is not repaying our EMIs on time and making way for defaults. A lot of time people also don’t read the dotted line and sign a loan without understanding the consequences and clauses in the loan agreement and that leads to some serious financial mishaps. One should always check how much the EMI would be by using an EMI calculator to gauge our repayment capacity. 

The Consequences of a Poor CIBIL Score

A low CIBIL score can result in several unfavorable outcomes. We might face higher interest rates, as lenders may perceive us as a high-risk borrower. Additionally, we may receive a smaller loan amount than we need or, in some cases, our loan application might be rejected outright. One might also have to mortgage some sort of collateral for the loan to get sanctioned and can place a huge burden on the rest of our assets.

Strategies to Boost Your CIBIL Score

Improving our CIBIL score can enhance our chances of securing a personal loan. Consistent, timely payments of our existing debts, maintaining a low credit utilization ratio, and regularly checking our credit report for errors are effective strategies to boost our score. We can also apply for a loan with a co-signer that may come to our rescue in case we are unable to pay the installments. A lot of people who are unemployed or do not have a fix salary may have to get a loan this way. 

Choosing the Right Lender for a Low CIBIL Score

While a low CIBIL score can make getting a personal loan more challenging, some lenders specialize in offering loans to individuals with lower scores. It’s essential to do our research and choose a lender that accommodates our financial situation. Look for lenders who have flexible credit requirements or offer loans specifically for those with low CIBIL scores.

When our Loan Gets Denied

If our loan application is denied due to a low CIBIL score, it’s important to understand the implications and the steps we can take to improve our potential for future approval. A loan denial can initially lower our score but taking the right measures to improve our creditworthiness can help us recover and enhance our chances of loan approval in the future.

Also Read: Get a Personal Loan Without Security

Managing Personal Loans with a Low CIBIL Score

In conclusion, while having a low CIBIL score can present challenges when applying for a personal loan, it’s not an insurmountable obstacle. By understanding the role of our CIBIL score, avoiding common mistakes, improving our score, and choosing the right lender, we can navigate the personal loan process more effectively. Remember, a low CIBIL score is not a permanent setback. With the right strategies and patience, we can improve our score and our financial health.