Diwali being the occasion for light is truly the festivity of Joy, Celebration, and the philosophy of charity. For everyone, this festival also translates into significant money spent, such as house renovation, gifts, or family get-together. If you are going to seek a personal loan for such holiday spending but have a low CIBIL score, then you may worry about rejection. But there are methods you can adopt to improve your chances of getting a personal loan even with a low CIBIL score.
Let’s first attempt to understand what a CIBIL score is and how it impacts your loan sanction eligibility.
CIBIL Score Understanding and Its Effect on Loan Sanction
The CIBIL Score is a number with three digits between 300 and 900, each number denoting one’s creditworthiness. CIBIL scores depend on payment history, along with credit and general financial behavior. It assists the banks and other lending institutions in assessing the risk of lending to you. Usually, a score of more than 750 is preferred while sanctioning loans, and lenders avoid lending below 750 as being of higher risk.
If your CIBIL score is below 750, it doesn’t mean you’re completely ineligible for personal loans. There are ways to navigate the situation effectively and improve your loan approval chances.
Challenges of Getting a Personal Loan With Low CIBIL Score
Personal Loan With Low CIBIL Score it difficult to get a personal loan due to the following reasons:
A higher rate of interest: A low CIBIL score suggests higher risk for the lenders, and due to that, they will be charging a higher rate of interest on loans.
Chances of Rejection: Most traditional banks and other financial institutions can reject your loan application directly if your score falls below their minimum benchmark.
Smaller Loan Size: Lenders may not want to approve big loan sizes with a lower score.
But hope is not lost yet. Student loan and festival expenditure personal loans are for unique needs, and lenders have also softened up with candidates who possess lower credit scores. Let’s discover how to improve your approval prospects.
Diwali Loan Tips to Improve Approval With Low CIBIL Score
1. Select Lenders Providing Loans to Low CIBIL Score Borrowers
The NBFCs and FinTech lenders are running a business to disburse personal loans to individuals with bad credit scores. These lenders are lenient and devise loan products for those borrowers who will not clear the loan eligibility criteria at typical banks.
Why NBFCs Are a Suitable Option:
They look at your financial wellness more than your past record.
Faster approval process during festivals like Diwali.
Less strict standards than traditional banks.
Once you have located any of the lenders, research rates and conditions to ensure the best bargain.
2. Improve Eligibility With a Co-Applicant
If you do not have a great CIBIL score, having a co-applicant with a good credit rating can improve loan approval chances. Co-signers share the responsibility for your loan equally and give the lenders a sense of confidence in repayment.
Who Can Be a Co-Applicant
Family members (spouse, parents, or siblings).
Acquaintances or friends with good credit history.
Having a good credit holder co-applicant not only raises your possibility of approval but may also result in favorable terms, such as lower interest rate or higher loan amount.
3. Select Secured Personal Loans
For low CIBIL scorers, secured personal loans are a lifesaver. Loans are secured against an asset such as gold, property, or fixed deposits. Collateral reduces the risk for lenders, and therefore there are possibilities of availing the loan even if your credit history is not favorable.
Benefits of Secured Loans:
Smaller interest rate compared to unsecured loans.
Quicker and easier approval process.
Flexibility in repayment.
At Diwali, personal loans can pay for festive expenses and increase your financial stability.
4. Demonstrate a Stable Income
Banks usually verify your income to assess your repayment ability. If you have a low CIBIL score, a steady income that is sufficient may garner confidence from lenders with regard to your repayment ability.
Tips to Demonstrate Financial Stability:
Must furnish evidence of employment, i.e., salary slips or bank statement.
Include other sources of income (freelancing, rental income).
It should highlight a good debt-to-income ratio on your application.
5. Pay Off Small Debts Before You Apply
Another easy but effective way to boost your creditworthiness in no time is paying off smaller debts or credit card balances before you apply for a personal loan. Paying off your back bills and getting a tighter debt-to-income ratio is what will set you up as a better prospect for lenders.
How to Prioritize Debt Payment:
Pay off high-interest debts first (like credit cards).
Make punctual payments without skipping due dates.
Don’t take new debts to settle old ones.
6. Take Student Loans as Personal Loans as an Option
If you are a student or a young borrower with a low CIBIL score, you may look at specialized personal loans for student loans. These loans may have more lenient terms reserved for students or recent graduates with little financial history. Your future earning potential is taken into account by some organizations rather than solely your credit score.
Benefits of Taking Student Loans:
Flexible repayment schedules based on your ability to earn.
Lower credit score requirements.
Opportunity to enhance your credit score by timely payment.
Conclusion: Achieving Financial Freedom This Diwali
A low CIBIL score personal loan can appear out of reach, yet by adopting intelligent techniques such as choosing secured loans, turning to NBFCs, or adding a co-applicant, you can definitely improve your chances of being approved at Diwali. Additionally, paying off small dues and demonstrating a regular income make you a more favorable bet among lenders.
The festival time is times of celebration, and economic adversities must not spoil the celebrations. With diligent planning and the appropriate funding source, you can enjoy the funds to turn this Diwali into a day to recall. Choose alternatives like student loans for personal loans or tailored NBFC products to discover low-cost borrowing solutions. Above all, repay early to redeem and increase your CIBIL score for subsequent funding needs.
Whether to give, home improve, or create memories with loved ones, these strategies will allow you to go ahead and maneuver the credit world and seize the opportunities that lie before you.
