Today, getting an instant loan is not a problem as these are easily available from both traditional and non-traditional sources. However, getting a personal loan when the borrower has no CIBIL score or credit history, or a low score, can be difficult for some. For such basics, borrowers should know that they can get instant loan without CIBIL score.
CIBIL refers to Credit Information Bureau (India) Limited. Besides TransUnion CIBIL (its full name), there are other credit bureaus such as Experian, Equifax and CRIF High Mark.
These agencies maintain records related to the credit activities of individuals and businesses. When either category applies for loans or credit cards, the bank or other financial entity first checks the applicant’s credit history before approving or denying the application.
What is a credit score?
To elaborate, the credit score is a three digit number between 300 and 900 that reflects the creditworthiness of the potential borrower. This score is derived from borrowers’ past borrowing, spending, and repayment habits, which are shared by financial institutions with these credit bureaus.
The above facts show why credit scores are important for obtaining loans and credit cards. But it is possible to take advantage of financial products even without an adequate credit score or credit history. The different ways to do this are described below for the benefit of readers.
9 ways to get an instant loan with a credit score
Choose secured loans
Instant or personal loans do not require any collateral or collateral. However, this is only the case if a borrower has a high or good credit rating. If this is lacking, borrowers can still avail loans by opting for secured or collateral-backed loans such as stocks, property, fixed deposits, jewelry, etc.
If a borrower’s assets are pledged, almost all lenders will be willing to advance an instant loan. A borrower then has the option of choosing the most suitable lender based on terms, interest rate, seniority and other conditions.
If the borrower is unable to repay the loan at any time, then the lender reserves the right to seize the collateral or pledged assets to recover the outstanding loan amount. Therefore, it is better to pay the equivalent monthly installments (EMI) on time each month.
Find a guarantor
The best way to get a loan with no credit score is to find someone to act as a guarantor. A family member, friend, colleague or confidant can be a guarantor. Of course, the guarantor must have a good credit rating, which will ensure that the applicant’s loan will be approved without too much difficulty.
But finding a guarantor is only possible if the applicant has a trustworthy reputation.
Apply with a co-applicant
A co-applicant with a stable income is another way to ensure that an instant loan is granted without unnecessary hassle. The co-applicant must, however, be a family member who has been informed in advance of the applicant’s intention to opt for an instant loan.
The Guarantor and Co-Applicant assure the Lender that in the event of Borrower default for any reason, the outstanding Loan amount can always be recovered from the Guarantor or Co-Applicant.
In either case, the guarantor or co-applicant will need to meet the required Know Your Customer (KYC) and eligibility criteria, just like the applicant.
Prove your creditworthiness
If an applicant has never borrowed before or has only used credit cards infrequently, the person will not have an appropriate credit history. Yet, lenders will overlook these issues if the person has a stable and regular source of income. This can be proven by payslips and bank statements.
Once a lender is sure of the applicant’s proof of income and ability to pay EMIs on time each month, their creditworthiness will be established.
Request a lower amount
If an applicant has a low credit score or does not have the same credit score, the likelihood of a higher loan amount being approved is negligible. But a lender may be willing to offer a loan if the amount sought is lower. The lender will compensate for the additional risk by charging a higher interest rate.
Lenders would also be convinced that the borrower will find a lower loan amount easier to repay. Approval and repayment of this loan will then help the borrower improve their credit rating.
Get a history not available (NA) or no history (NH) on the credit report
NA or NH on a person’s credit report indicates that there has been no credit activity for the past three or more years. Therefore, before applying for a loan, applicants should check their credit history, which can be obtained free of charge from various financial entities, including lenders.
In the case of an NA/NH remark, the reason for the lack of credit activity can be explained to the lenders. Subsequently, a loan can be approved.
Even so, a lender may charge a slightly higher interest rate to account for any additional risk given the lack of credit activity. Or they can consider other factors and offer an instant loan at the regular interest rate.
Check eligibility in advance
Although crucial, this factor is usually overlooked by most potential borrowers who apply for loans left, right and center, hoping that it will do the trick despite the low or no credit score. But such a strategy can be counterproductive as it triggers difficult demands from lenders, further reducing their chances.
Hard inquiries are where lenders check a borrower’s credit score before approving a loan. When a borrower makes multiple applications, it ends up in many difficult inquiries with the credit bureaus, making the applicant seem desperate for credit. Lenders are then reluctant to approve the loans.
Applicants with low credit scores then suffer as further investigation lowers their credit status. Even if they get credit, it may be at a higher interest rate due to difficult inquiries. Therefore, before applying, borrowers should inquire discreetly online to find out where they meet the criteria.
Note that lenders, whether physical or digital, have varying eligibility criteria. Checking these conditions beforehand helps to understand what suits a borrower and what does not. Once this is clear, an applicant should then apply only to a specific lender to increase their chances of approval.
Approach to Non-Banking Finance Companies (NBFCs) or Housing Finance Companies (HFCs)
Typically, traditional lenders such as banks are risk averse by lending to borrowers who do not have an appropriate credit history. In such situations, it is best to approach the NBFCs.
While NBFCs will provide loans to people in high-risk categories, borrowers will have to pay more interest for the greater risk involved.
Opt for online lenders
As mentioned earlier, traditional lenders are risk averse. Although NBFCs may be willing to offer loans to those who do not have a credit score, strict conditions could prevent potential applicants from being eligible for their loans.
If so, online lenders or fintech companies can be approached for an instant loan. Fintech companies use digital means to verify an applicant’s KYC compliance and are more receptive to offering unsecured loans to borrowers with no credit history.