Introduction
In this post we are going to talk about, what are the options of taking a loan, if your CIBIL Scores are low? In this article, I will give you 9 tips, if you have any home loan, personal loan, or education loan requirement Then how you can do it, and what will be the alternatives, even if you have a low CIBIL Score then there can be some options available & you can take a loan.
What will be the effect of the CIBIL Score on the capacity of taking a loan?
Here are the statistics, here it is shown how much loan accounts fall in which % 19% of loan accounts fall in the 815-900 range, the CIBIL Score is from 300-900 20% of loan accounts fall in 800-824 range,
21% fall in the 775-799 range, Another 21% fall in the of 700-774 Only 19% of loan account falls in the range of 300-699. As you can see that only a few loans are issued if the score is between 300-699.
In the case of a bank, They disperse about 80% of the loan to the score of 750 or higher That's why we have to maintain a good credit score. If your score is 800 or more then most banks and NBFCs provide loans to you easily At the best interest rates.
suppose the lowest home loan interest rate is 8.5% you can avail of it easily if your score is above 750 If talk of the 700-799 range, Most banks, and NBFCs offer loans to you.
But interest rates may be a little bit higher 0.25-0.50% or a max 1% higher interest rate You can get an interest rate up to 8.75 to 9% at the place of 8.50%. Now if the score is 775-799 Then it is concerning Most of the banks and NBFCs does not offer loan to it.
Some of the banks and NBFCs offer loans at higher interest rates of 0.5-2% If you get a loan at 8.5% with a score of 800.
Then you can get a loan of interest of 10-11% in the 750-799 range. It becomes difficult if your score is below 700 Most banks and NBFCs do not offer loans to you It generally happens when you default on past loans.
How you can improve your CIBIL score?
Now, if your score is 700 below and you are not getting a loaner you didn't have a credit history at alright, Then how you can get the loan in that case and see what alternative you have firstly, If you want a home loan especially, you should get on spouse name husband or wife whose CIBIL score is good or you can apply for a joint loan.
In a joint loan, a CIBIL score of both is considered that you are better off, chances of getting a loan are higher is useful in home loans and bigger loans when you getting in a loan on spouse name or joint loan Point Second, you can add a guarantor if you not greeting a loan at own name or on not having a credit history.
How To Take Loan If I Don't Have Credit History?
Maybe you go for higher studies and do not have any job which means you didn't have a credit history. In that case, you can add your parents, brother-sister, or any relatives as guarantors.
If you didn't have a credit history or a low score You should make a person guarantor whose credit history is good. A guarantor is generally useful in getting an education and personal loans. Thirdly you can approach alternating lending institutions like cooperative banks Rural banks and microfinance companies.
Microfinance companies, These types of small companies or cooperative banks Didn't check the credit score. Therefore you can approach this for a loan Especially in cooperative and rural banks.
If you are familiar with someone there then you can get a loan easily. You can take help from the guarantor. If you know someone who already has a loan account bank, savings, or another account in a cooperative and rural bank there. Then they can act as a grantor to you and you can get a loan this way
Remember one thing interest rates in these loans can be higher. Suppose the best rates get on a home loan in a joint loan case. Let's say the best rate is 8.5% in the normal case. Then you have to pay an interest rate of 12-15% in that case. It is not bad at all if you didn't get a loan from any banks.
Can You Get Load Against Securities?
It may be a nice option for you Option fourth is, Loan against securities. if you have F.D in a bank, any L.I.C policy, or shares. You can get a loan against these securities, especially In the case of L.I.C or a life insurance policy(Endowment/whole life) In which money comes back. These loans are not available against the term insurances.
Where money-back guarantees are there or endowment policy or whole life policy we can get a loan against them or against gold security or against epfo We have talked about mutual funds and shares or against credit cards, in fact, we can get instant loans in credit cards in today's date. but yes you don't get loans for a big amount.
Then, overdraft facilities are also available there On salary accounts or saving or current accounts but in this, we have to keep in mind that interest may vary from normal home loans but it will be lesser than personal home loans so when we talk about home loans. where we can get 8.5% interest on a loan then we can find that it will be 1 or 2% will be more than you have paid the average 10% average rate but it is very cheap in the case of a personal loan. You can get up to a 14 to 20% rate.
Then loan against security is a good option Where your credit scores are not checked. the second merit of this is that It will help in improving your credit score because let's consider If u take a loan against FD and u have less credit score. If we pay our new loan payment on time. It will help in improving our credit score right.
Then you should be alert when you have security and if you take a loan against it. then it will be very profitable, you can get a loan against it plus your credit score will also improve.
What Is The Procedure Of Taking a Loan Form for A Family Member?
my fifth tip is that you can take a loan from friends and family many people know that you can sign a proper loan agreement In which, how much will you make the interest payment, how will the payment terms that you either pay monthly quarterly, annually or a lump sum amount.
It is up to you, that interest rate can be 0% or at the market rate, let's say up to 0% to 10% or you can decide any interest rate because it will be an agreement between friends and family then there will be no problem to anyone second thing is that many didn't know about the tax benefits in this.
What Are The Benefits Of Taking a Loan From a Friend Or Family Member?
For example, if take a home loan, let's say from your own parent's et's consider at 0% then also you can take tax benefits, especially under section 80c when you make principle payment under section 80c you can get tax benefits.
so you can take these tax benefits even if you take a loan from friends or family but yes for proof u need to sign a loan agreement Then If you are salaried class, then it may be possible your companies have tie-ups with some banks because their relationships are good with the banks Then you can approach a bank that has a corporate account of your company because they give too much business to the particular bank.
Can We Get Loan If We Do Job In A Reputed Company?
So, any bank can give a loan easily to the employee of any reputed company in such case they will not check credit score they will basically give a loan on the company's reputation and you can approach HR and you can take a letter from them.
Generally, there are no problems for the companies for issuing such type of letter Generally, this is beneficial for small loans you can't take big loans from this But let's consider there is a requirement of some small loans up to 40 or 50 thousand or 1 or 2 lacs requirements Then, you can also approach to corporate tie-up banks
Should We Take Loan From Private Lenders?
You can also approach private lenders. private lenders are especially very popular in rural and semi-urban areas and in fact, private lending is mostly common in India but the only disadvantage of it is that interest rates will be more.
So, local financers in every local area in fact in the cities will charge rates of up to 2 to 3% monthly then the annual interest rate could be 24 to 36% which is the very high-interest rate
In the other options we have talked about, you can get a low-interest rate in them up to 10% or 12% or 15% but in the case of private lending interest rate will be higher Plus they will give the option to mortgage the property of the gold of yours then only they give loans For a small amount loan, consider it for the lesser duration because you should not take this for a longer duration
Because the interest rate will be much higher when you calculate it You will find that within 2-2.5 years your borrowed amount will be equal to your interest amount Let's consider you take the amount for 3 years at a 36% rate then 36*3 it will cross 100 Then, let's consider you take a loan for 2 lacs for 3 years then you are going to pay more than 4lacs right Then for sometimes, let's say 4 or 6-month requirement then u can also consider this option, otherwise
How does Peer to Peer lending institutions provide loans in India?
Now, the 8th tip is, In today there are many new peer-to-peer lending institutions, and many people are unaware of them. This is basically an organized way of private lending, we have talked about private lending in which an individual financer, Who has a small amount of money, generally, deals in cash/gives money
But in peer-to-peer lending today, many organized companies take money from investors where investors invest their money If u want to invest then u can invest with peer-to-peer lending institutions from where your money is given to others In between they will take their commission and lend money to other
Just like that, u can take a loan from a p2p institution, I'm not telling you about the names of any institution This is not a sponsored post but if u search u can find many p2p lending institutions Here interest could be 15 to 30%, and now considering private lending individuals this is better then that
Here, u can build trust because here company is investing its own reputation as a stack at its own risk right Then, the loan tenure could be somewhat of 6-36 months, u should not consider it as a home loan
Basically, if there is a requirement for a personal loan then u can consider p2p lending, and here also credit score is not considered but in some cases, it may be considered, maximum p2p lending institution will consider every factor Let's consider your credit score is less but your salary or income level is good you are frequently an investor u have saving habits then u can get loans easily and yes second thing is that this institution is not regulated RBI has no regulation on this as on date.
So basically this will not impact your credit score like if u have borrowed any amount from p2p as a loan and if u pay the payment on time it will not affect your credit score Then u should keep in mind that if u want to improve your credit score, then you can take a loan against security it will improve your credit score.
How Much CIBIL Score is best for a loan in India 2022?
Now let's talk about, you should improve your CIBIL Score. Because there is no real alternative way of improving the CIBIL Score. if you have less CIBIL Score then there could be problems in the future. Your target should be to always maintain more than a 750 score and if can maintain more than 800 scores then it will be best because you can get the best rate for every loan.
You should make good credit history But if you have a score of more than 750 before and now it became less than 600 or 650. Then it will not improve immediately for reaching that level again could take 1 or 2 years.
Conclusion
That is why I always told you that you should make payments on time and also EMI. always make full payments if u use a credit card then don't make minimum due pay and always make full payments. Because that will also lower your CIBIL Score.
Thanks!!