A personal loan is an unsecured loan that you can avail of emergencies. Lenders who offer personal loan check your CIBIL score before lending. To understand how this works, you need to first know about CIBIL and its relation to the personal loan.

What is CIBIL Score and why is it important for Personal Loan

CIBIL Credit Information Bureau, India Limited prepares a credit score which acts as the first criterion to check the eligibility of a person for a personal loan. This credit score is a three-digit numeric summary of your entire credit history. This is based on the information provided by banks and other financial organizations on a monthly basis whose value ranges from 300 to 900. A score lower than 750 is considered as a low CIBIL score. Banks generally do not sanction personal loans of people with a low CIBIL score, or even if they do, they may charge a very high rate of interest.

When applying for the loan, CIBIL score is the first thing they would check. CIBIL score depends upon the repayments of personal loans, home loan, vehicle loan and/or credit card debts. In case the repayments are done in a timely manner, it will translate into a good CIBIL score. On the other hand, untimely payment of dues and EMIs will have a negative impact on your CIBIL score.

A personal loan is a loan taken to deal with personal emergencies. So, to sanction a personal loan, a lender thoroughly checks if the applicant is capable enough to repay the loan timely. Since there is no collateral or security deposited with the lender, it is important for them to check the past history of the applicant in terms of credit repayment via CIBIL score.

What are the factors causing a low CIBIL Score

The following are the factors causing a low CIBIL score:

• Multiple loans cause a low CIBIL Score.
• High Utilization of credit limits.
• Untimely payment of loan EMIs or Credit card dues.
• A higher percentage of unsecured loans.
• Having no credit history at all.
• Too many rejected loans/credit card requests.
• Settling credit cards with the bank by paying a lower amount than the dues.

How to get a personal loan with a low CIBIL score

A low CIBIL score might lower your chances to get a personal loan sanctioned but still, there are other options which could be explored in order to avail a personal loan with a low CIBIL score. The following are some of the options which could help to get a personal loan despite a low CIBIL score:

Collateral loan: In case if the personal loan application does not get sanctioned, one can try to get a secured loan. Collaterals such as gold, land, fixed deposits etc. can be used to avail a secured loan even with a low CIBIL score.

Check for tie-ups between your employer and the lender: If you work in a reputed firm, there are fair chances that it might have tie-ups with the lenders as a part of corporate relations. As a result of such tie-ups,the bank often offers special facilities on loan and other banking facilities. This could be helpful in getting a loan.

A joint loan with your spouse or family member: Check with your spouse and family members if they have a good CIBIL score. In case anyone in the family has a good CIBIL score, you can take a joint loan which could be sanctioned based on both of your CIBIL score.

A guarantor: If you are able to get a guarantor among family or friends who have a good CIBIL score then there is a higher possibility you might get a personal loan sanctioned based on guarantor CIBIL score.

Other Sources: Other sources apart from banks which might lend you are worth considering too. Non-banking finance companies NBFCs are more than willing to offer you a loan but at a higher rate of interest than that of the bank.

Although a good CIBIL score is required for getting a personal loan, these alternate options mentioned can help you to get a personal loan despite a low CIBIL score.