There are many instances where people tend to default on their loans or any other financial product they avail. Credit card defaults and loan defaults are the two main reasons that affect the CIBIL score. It is challenging to maintain a decent credit score throughout our financial journey. CIBIL defaults are not a good sign if you want to have a long-term partnership with a bank. If you have an excellent CIBIL score over 750, only then you can qualify for a personal loan

You can be eligible for a small cash loan if you have a CIBIL score of over 600. The former includes a more significant loan amount. Thus the credit score requirement is stringent. In the case of the latter, the borrowing amount is up to Rs. 50,000 only. Therefore, a lower CIBIL score is acceptable. The financial institution will approve your loan application only after reviewing your CIBIL report. This is why it is essential to have a good credit score.

Personal loan for CIBIL defaulters in India

It is not easy for the CIBIL defaulters to avail of personal loans and credit cards. There are only a handful of financial institutions in India that grants its financial products to credit defaulters. Availing an unsecured loan is the most difficult task when you are a CIBIL defaulter. This is because the lender is at a higher risk as it knows that the loan repayment may not be completed as per the terms and conditions.

Availing Personal Loan in India if you are a CIBIL Defaulter

Financial institutions in India generally hesitate to grant personal loans to the CIBIL defaulters as those with poor credit history may tend to seem to default at the repayment of the new loan as well. Herein are some of the steps that a CIBIL defaulter can follow to avail of the personal loan.

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• Use your Spouses’ CIBIL score –

As a CIBIL score defaulter, you will find it difficult to avail a personal loan. In this case, you can use your spouse’s financial credentials. If your spouse possesses a good CIBIL score, you can make your spouse a joint account holder with you.

• High Income –

Despite being a CIBIL defaulter, if you get a high monthly income, then the financial institution will easily grant you a personal loan. The bank will only give you the personal credit considering your rent as high income indicates functional loan repayment capacity.

• Collateral Loans –

If you are in urgent need of personal loans and are finding it challenging to avail it because of your poor CIBIL score, many financial institutions in India offer personal loans against collaterals. Your shares, assets, and fixed deposits can be used as collateral.

• Opting personal loans with higher interest rates –

You can avail of personal loans as a CIBIL score defaulter provided that you opt for the loans with a higher rate of interest. A higher price will mean a higher interest payout. But if none of the other options work for you, then you can still opt to choose a higher interest rate loan. Make sure to timely pay the loan to improve your credit score.

Documents Required for Personal Loan

You can avail of personal loans for catering to all your personal financial needs, such as making a big-ticket purchase, house remodeling, child’s education expenses and much more. On the other hand, the funding option can also be availed in case of emergencies such as hospitalization charges, etc. These are the unsecured debt that comes with short tenures of 1-5 years.

Some of the documents needed for the loan are:

• Identity Proof (any of the following):  Aadhar Card, Mobile/Telephone Bill, Life Insurance Premium Receipt, Voter ID Card, Passport, Electricity Bill, Ration Card, Employer issued ID Card, Driver’s License, PAN Card, Title deed/utility bill/municipal tax receipt
• Age proof (any of the following): Birth Certificate, PAN Card, Ration Card, Voter ID, Passport, Aadhar Card, Secondary school certificate (Class 10), Life Insurance Premium Receipt
• Residence proof: Electricity Bill, Ownership and Title Deeds of Property, Ration Card, Government-issued Employee Residence Proof Telephone Bills
• Your photo ID and a passport-sized photograph
• The signed loan application form
• For income proof, you need to submit salary slips of last three months
• Computation of income and Income tax returns of the previous three years
• Form 16
• You have to provide a bank statement for the previous six months
• Profit and loss account and audited balance sheet for the previous three years. A Chartered Accountant must certify these documents

Availing Personal Loan without Documents

There are only a few financial institutions and banks in India that offer personal loans without documentation. They will rely on customer relationships with them for availing of the loan.

• You will be required to build up a healthy relationship with your bank regarding all the financial as well as non-financial aspects. This way, the bank will develop a sense of trust in you.
• If you are maintaining a good score with the bank, they will automatically decide the loan amount and loan tenure for your loan.
• On the other hand, if you are applying for a loan from your existing bank, then it will get even easier for you to avail the loan. As the bank will be well-known with all our transaction history, your creditworthiness can be easily accessed by them.
• If you own a credit card with the bank, make sure to pay all the credit card dues on time. If you maintain a good credit history with the bank, they will quickly sanction you for a personal loan.
• Never miss out on any payments regarding the bank. Due to the payment might indicate that you can’t handle significant payments. On the other hand, it also shows your incapability to repay the loan amount if availed.
• You are required to maintain a good credit score, or you can say your CIBIL score should be above average to gain the trust of the bank.

There are several instances where, due to a lack of/fault in the documentation, many individuals are kept out from availing the loan.

To Conclude

A personal loan for those with weak credit scores is not impossible. However, a low CIBIL makes it harder to get a borrowing facility with feasible terms and conditions. But, sometimes, the lender may consider your income, repayment capacity, assets, and other requirements to provide the best loan offer. Even if you lack the documents to apply for the loan, there are several ways around it. And, you can get a suitable loan deal despite lacking on many fronts.