How to get an instant loan no CIBIL score – Forbes Advisor INDIA
Today, getting an instant loan is not a problem as these are readily available from both traditional and non-traditional sources. However, getting a personal loan when the borrower does not have a 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 keep records relating 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 patterns, which are shared by financial institutions with these credit bureaus.
The above facts show why credit scores are important for getting loans and credit cards. But it is possible to avail of financial products even without an adequate credit score or credit history. The various ways of doing this are described below for the benefit of the 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 enjoys a high or good credit rating. If this fails, 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 as collateral, almost any lender will be willing to provide an instant loan. A borrower then has the option of choosing the most suitable lender based on terms, interest rate, term, and other conditions.
If the borrower is unable to repay the loan at some point, then the lender reserves the right to seize the collateral or pledged assets to recover the outstanding loan amount. Hence, it is better to pay the Equivalent Monthly Installments (EMI) on time every month.
Find a guarantor
The best way to get a loan with no credit rating is to find someone to vouch for it. A family member, friend, colleague or confidant could be a surety. 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 surety 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.
Both the guarantor and the co-applicant assure the lender that if the borrower defaults for any reason, the outstanding loan amount can still be recovered from the guarantor or co-applicant.
In both cases, the guarantor or co-applicant will have to meet the required Know Your Client (KYC) and eligibility criteria, just like the applicant.
Prove your solvency
If an applicant has not borrowed before or has only rarely used credit cards, the person will not have a suitable 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 their ability to pay IMEs on time each month, their creditworthiness will be established.
Request a lower amount
If an applicant has a low or different credit rating, the likelihood of a larger loan amount being approved is negligible. But a lender may be willing to offer a loan if the amount sought is less. The lender will compensate for the additional risk by charging a higher rate of interest.
Lenders would also be confident that the borrower will find a lower loan amount easier to repay. The approval and repayment of this loan will then help the borrower to 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 in the past three or more years. Therefore, before applying for a loan, applicants should check their credit report, 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.
Despite this, 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
While crucial, this factor is generally overlooked by most potential borrowers who apply for left, right, and center loans, hoping that it will do the trick despite having poor or no credit scores. But such a strategy can be counterproductive as it triggers difficult investigations from lenders, further reducing their chances.
Serious surveys are those where lenders check a borrower’s credit rating before approving a loan. When a borrower makes multiple requests, it ends up with many inquiries to the credit bureaus, making the applicant appear to be desperate for credit. Lenders are therefore reluctant to approve loans.
Applicants with low credit scores then suffer, as the thorough investigation further reduces 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 discreetly inquire online about where they meet the criteria.
Note that lenders, whether physical or digital, have varying eligibility criteria. Checking these terms beforehand helps to understand what is right for a borrower and what is not. Once this is clear, an applicant should then only go to a specific lender to increase their chances of approval.
Approach Non-bank finance companies (NBFC) or Housing finance companies (HFC)
Typically, traditional lenders such as banks are reluctant to take risks by lending to borrowers who do not have a suitable credit history. In such situations, it is best to approach the NBFCs.
While NBFCs will offer loans to people in high risk categories, borrowers will be charged more interest for the higher risk involved.
Go for online lenders
As mentioned earlier, traditional lenders are averse to taking risk. While NBFCs may be willing to offer loans to those without a credit rating, strict terms and conditions could prevent potential applicants from being eligible for their loans.
If this is the case, online lenders or financial technology 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.