Ever imagined that even though so many banks keep calling you for offering loans when you apply in need, you tend to find the road is not that smooth in comparison to what they say on promotional phone calls.
Be it personal loan or home loan, all the loan processes have certain criteria to be fulfilled, and the major roadblock in the process is the CIBIL score.
CIBIL score is a representation of one’s credit worthiness to be precise and most banks approve the loan if the score is more than 750. This is a thumb rule calculation for anyone and everyone.
But answering this subject question, yes you are still eligible and at the end of the day the discretion lies with the individual financial institutions, let’s consider a bank, for easy understanding.
Understanding the factors of low CIBIL score
“If your score is low because of default then chances of getting a loan is lower. But if the score is low because of less amount of loan taken or because credit history is relatively recent then you can still get the loan,” points out Harsh Roongta, CEO, ApnaPaisa.com.
- Have you been clearing the payments on time? If an individual has not had a good history of clearing the EMI’s then it should be considered that it will lead to a low score as well as banks not approving the desired amount or no amount at all. This all gets reflected in the CIBIL database.
- Having too much credit is also one of the reasons for not having a good CIBIL score.
- The credit card outstanding amounts if not cleared on time and even the minimum amount due is not cleared, then this should be worth considering. It is always preferable to clear the outstanding at once or at least in lump sum amounts.
- For some of the reputed financial institutions, even the tenure of one’s services in a brand matter. For example, a person with lower score in a big known MNC may still get loan but a person in a lower brand firm with a little better score may not get the same consideration. Of course, in either case, the total amount may not be the desired one and could be lower than that.
“Someone with lower credit score can avail secured loans like a home loan at interest rate ranging anywhere between 11.50 per cent and 18 per cent. The rate may jump a little (between 13 per cent-18 per cent) for loan against property. The rate of interest on unsecured loans can range anywhere between 18 per cent and 26 per cent,” says Naveen Kukreja, MD, Paisabazaar.com.
The options that are available for individuals facing these kinds of difficulties could perhaps lead to non-banking financial institutions which are more flexible in terms of score but yes, they do charge a higher interest rate.
- If there is an asset, then that can be used as a collateral for lower rates.
- Gold loans and loans against a property also happen to be good options.
Peer to Peer(P2P) websites also happens to be one of the options for individuals. The profiles with low scores do get scrutinized very rigorously but yes, chances of getting loan are available.
If one is aware of the CIBIL score, instead of going out for the enquiry, better go for the other options and find a way to negotiate well with them and avail a loan.