Banks and financial institutions consider the CIBIL score to be one of the important factors in lending. A CIBIL score of 550 is on the lower side, and the chances for rejection are high. However, there are lenders with whom you can secure a personal loan with a CIBIL score of 550. If your profile fits the description, then this article is for you.
Understanding the CIBIL Score
CIBIL score is a three-digit number that indicates your creditworthiness to banks and financial institutions. For every loan or credit you borrow, the CIBIL records it, and your score is updated accordingly. Non-repayment of loan EMIs or credit card bills leads to a lower CIBIL score. Hence, getting a personal loan for a CIBIL score of 550 is a difficult task. While conventional banks and NBFCs will refuse to lend money, there are other ways to secure a loan with a CIBIL score of 550.
Personal Loan Options for a 550 CIBIL Score
If your CIBIL score is below 600, traditional banks like government banks will not approve your loan application. It is not the end of the road. Nowadays, it is possible to get a personal loan with a CIBIL of 550. Although the terms and conditions of such loans may not be agreeable to borrowers, it is a relief during a financial emergency. Consider the following loan options for a 550 CIBIL score.
Payday Loans
Payday loans are instant loans offered to those who need money urgently. Payday loan providers offer personal loans for a CIBIL score of 550 in India. The biggest advantage of these loans is that they are processed quickly, with less paperwork. All you are required to do is go through an e-KYC process. The final loan amount will depend on your CIBIL score. However, borrowers have to repay payday loans within a month. It is advised to read the offer documents carefully before committing to payday loans.
BNPL loans
As the term indicates, BNPL (Buy Now Pay Later) loans are a variation of payday loans. BNPL loan providers do not conduct stringent credit checks, hence, this is one of the good options to consider for a personal loan for a CIBIL score of 550 in India. These loans enable borrowers to utilise credit to shop online, thus eliminating the need to pay with cash upfront. Borrowers can repay through monthly EMIs or completely repay within the next month. The interest rates for BNPL loans are lower than those for Payday loans. However, remember that maximum utilisation of your credit limit or missing BNPL loan repayments can adversely affect your CIBIL score. Amazon Pay Later, Flipkart Pay Later, Flexmoney, Slice, and Kreditbee are a few of the major BNPL loan lenders in India.
Secured Loans
Secured loans are loans lent on tangible collateral. All major government banks, NBFCs, and private banks in India provide secured loans. To secure a personal loan with a CIBIL score of 550 is difficult, as the policies of these major banks do not allow low CIBIL score borrowers to borrow loans. However, if you can name a co-applicant with a good CIBIL score and possess assets like land, gold, or government bonds, there are chances of getting secured loans. This is purely conditional and depends upon the lending banks to consider the application of borrowers with a low CIBIL score.
How Can I Improve My Credit Score?
Improving your credit score does not happen overnight and is solely reliant upon your discipline. Here are some of the strategies you can use to improve your score:
Pay on time
One of the simplest ways to positively affect your credit score is to pay your bills (credit cards, EMIs, utility bills, etc.) on time.
Keep your credit utilization ratio low
You should stay below 30% utilization of the credit limit you have been given; a high utilization rate indicates you are dependent on credit (which can decrease your score).
Have a good mix of credit
A good mix of secured debts (such as a home loan) and unsecured debts (such as credit cards) positively influences your credit score.
Don’t apply for multiple loans
Way too many hard inquiries in a short time can decrease your creditworthiness.
Check your credit report regularly
Check your report for errors or discrepancies that need correcting soon.
Can You Get a Personal Loan with a 550 Credit Score?
Although it may be difficult, it is possible to obtain a personal loan with a 550 credit score. Lenders will generally see this as a poor score. This means that you might be limited in the options available to you.
Here’s what you can reasonably expect:
- Decrease Amount of Loan: The loan amount available to you might be less than it would be for someone with a better credit profile.
- More Reduced Eligibility Requirements: Lenders might require more documents, proof of income, or even a co-signer.
- Secured Loan Options: A few lenders might be willing to offer you a secured personal loan against something like a fixed deposit or assets.
Strategies to Get a Personal Loan With a 550 CIBIL Score in India
To qualify for a low CIBIL score loan, adopting the following strategies will help.
Maintain a good credit score:
Whenever you purchase a credit card or take out a loan, it is recorded in your CIBIL report, and your score is updated. A good credit score is maintained when borrowers make timely EMI and credit card bill repayments.
Check Your CIBIL Score:
We cannot stress more on doing this enough. The notion that checking your own CIBIL score frequently lowers it is a myth. Your CIBIL report gives you a detailed explanation of any pending payments, thus helping you plan your finances consciously. This exercise ensures that you don’t default on your payments.
Go through your loan provider’s repayment policies:
This applies to BNPL and Payday loan borrowers. When you are familiar with your provider’s repayment policies, it helps you to make mindful decisions regarding your credit repayments and make thoughtful investments that can help in paying off these loans just in time.
Avoid having multiple credit accounts:
Multiple credit accounts indicate a lousy borrowing system to low CIBIL loan lenders. The same applies to multiple loans. If you have multiple ongoing loans, this can affect your CIBIL score.
Provide a stable proof of income:
A proof of income indicates to loan providers that you have the financial means to make timely repayments. This will help you to secure personal loans despite a low CIBIL score of 550.
Name a co-applicant with a steady income source:
If you are unemployed and are looking to borrow a personal loan, it is better to name a co-applicant who is employed. This will assure lenders that repayment will be done on time.
FAQs
Q1. Is it possible to obtain a personal loan with a 550 CIBIL score in India?
Certainly, it is very difficult. You may be able to get a personal loan from some NBFCs, fintech lenders, and companies that provide payday loans and BNPL loans, if you meet their other eligibility requirements, such as stable income or securing the loan with an asset.
Q2. What is the best type of loan to get with a CIBIL score of 550?
You can always explore a payday loan or a BNPL, or a secured personal loan. However, do note that these options can come with high interest rates. Hence, you should read the print before going ahead.
Q3. Will taking a loan help improve my credit score if I have a low CIBIL score?
Yes, if you take a loan against your low score with the intention of paying the loan back correctly and on time, your CIBIL score would be able to see the benefit over time.
Q4. How much loan amount can I get with a 550 CIBIL score?
This will depend on the lender’s policies, income, and collateral. Generally speaking, most lenders would provide smaller amounts of money with potential additional guarantees.
Conclusion
While personal loan options for a 550 CIBIL score are scarce, they exist. Consider the best lenders for low CIBIL score, like Payday loan lenders, BNPL, NBFCs (Non-Banking Finance Companies), and private banks. To realise your financial aspirations, adopt the low CIBIL score loan approval strategies listed above. These tips will help in qualifying for loans with a 550 CIBIL score. If you don’t have any other financial liabilities, it is better to keep a track of your CIBIL score and maintain a good number by following best practices.
