Are looking for How to get a personal loan for a CIBIL score of 550 in 2022? Then, you have landed in right place. A personal loan is an unsecured loan that banks and financial institutions lend to borrowers to help tide over financial uncertainties. A personal loan is very easy to acquire, and you can get it instantly with minimum documentation only if your CIBIL score is more than 650.
A personal loan is a popular and sought-after financial facility because there is no collateral required when acquiring the loan. It is an easy source of unsecured credit that can be used for any purpose when you are short on cash. Compared to other loans, personal loans have shorter documentation and processing times as well.
Importance of CIBIL score and how banks don’t lend to low CIBIL score
Now, personal loans are easy to acquire, don’t need any collateral, and have faster processing time because they rely on CIBIL scores to look at your creditworthiness. CIBIL scores are scores given to you by the credit bureau authorized by the RBI to do so. These scores range from 300 to 900, with 900 being an excellent score and 300 being the worst.
These scores tell the lenders about your creditworthiness. Scores above 700 show that your creditworthiness is high and that you will repay the loan on time. Hence there is very little chance of defaulting on your EMIs. On the other hand, scores below 600 raise doubts over your creditworthiness, and your chances of defaulting on your payments are very high. That is why it isn’t easy to get a personal loan with a CIBIL score of 550.
It may be difficult to get a personal loan approved for such a low score, but it is not impossible. I am discussing steps you can take to get a personal loan even with a low score. And I am also discussing how you can increase your CIBIL score so that it becomes easier for you to get personal loans in the future as well.
What can you do to get a personal loan with a CIBIL score of 550?
If you have a CIBIL score of 550 and you require a personal loan very badly, then fret not, as I guide you in understanding what steps you need to take.
- First and foremost is to do your due diligence. Research online and offline to make a list of banks and financial institutions that will offer personal loans for the amount you need for such a low score.
- After that, ensure all your documents are up to date and in place. The documents required are your PAN, Aadhaar, bank statements, and salary slips. For the self-employed, they need to furnish proof of income and bank statements for the last 6 months.
- Once you have your documents ready and know how much loan you require, approach the financial institution you have finalized.
- You can go for a secured personal loan. A secured personal loan requires collateral, so you will have to pledge something valuable on the line to get the funds. This will lead to faster approval as the risk of defaulting is diminished due to the collateral. You can also go for gold personal loans from a reputed lender who RBI authorizes to operate.
- You can also avail yourself a personal loan facility by having a co-signer sign on the documents. In this procedure, the co-signer is the guarantor who promises to pay back on your behalf if you default on your payments. It boosts your approval chances and makes it easy to get a loan.
- You could also approach credit unions to grant you a personal loan. Many credit bureaus lend money to borrowers even if they have a bad credit score. Credit unions are usually formed as non-profit organizations that don’t compel them to earn profits. Don’t approach too many institutions, as this again reflects on your credit scores negatively.
The points discussed above do not guarantee you a loan. These are steps you can take to get a loan. A score of 550 is a warning sign to lenders that you have mishandled your credit, and your creditworthiness is questionable. Leading banks and financial institutions might not lend you the funds no matter how dire your situation is.
So, it is reasonable to say that you must boost your credit scores to make you an eligible candidate to apply for a personal loan. I have discussed a few steps that you can implement to boost your creditworthiness so you can apply for a personal loan easily.
Increase CIBIL scores to make you more eligible
- To increase your CIBIL scores, first check whether there are any mistakes in your report about the transaction history, facts, and figures. In case of any errors, get them fixed, and you will see your scores rise. Make sure there are no errors before you go seeking a loan.
- Clear all your pending dues. Do not have any outstanding balances. It increases your creditworthiness which positively impacts your credit score.
- Make credit payments on time. Do not postpone till the last minute. As soon as they become due pay them off without delay.
- Use your credit cards for payments like bills for small amounts that you can be easily pay off. Do not use your credit cards for huge amounts and emergencies. Regularly paying off your credit card dues bolsters your credibility and increases your credit scores.
- Make a good budget. If you already have any loans try closing them first, especially the ones with higher interest rates. It will make your credibility shoot up. Spend wisely and always have some emergency funds.
- Keep yourself updated on your credit scores. Make it a point to generate the report every year to understand where you stand.
Always having a good financial plan can go a long way in securing your finances. In case you are unable to get a personal loan, then you must try increasing your CIBIL scores. It takes time, but the steps I have discussed above have long-term benefits.
You can utilize a personal loan for any purpose. If your credit scores are bad, you should approach a financial institution that will lend you collateral. Usually, the terms of such loans will be favorable to you and will not have a high-interest rate compared to an unsecured loan.
Unsecured personal loans will have a very high-interest rate if they are lent to someone with bad credit. Usually, other terms like EMI and tenure too will not be favorable to the borrower. It helps if you have a guarantor who can co-sign the loan for you, and that way, you can get favorable terms. You can also try borrowing from your family or friends who may be able to help you without any strings attached.