When a financial crisis hits you, applying for an instant loan is the best way to get out of it. However, if you have an extremely low credit score, you might think your chances of getting an instant loan are bleak.
But, while it can be difficult to avail of one, it is certainly not impossible to get an urgent loan for CIBIL defaulters. Following the tips below, you can get closer to getting an instant loan online.
But, first things first. What is CIBIL, who is considered a CIBIL defaulter, and what challenges do they face? So, let’s dive right in.
What is CIBIL Defaulters?
CIBIL stands for “The Credit Information Bureau (India) Limited.” It is one of four credit information companies that store credit information about individuals and businesses. The company has a “CIBIL score” that represents the individual’s health to repay the loan. This score has a range of 300 – 900. The closer the score is to 900, the higher the chances of getting approval for the loan.
While there is no one definition of a “CIBIL defaulter,” you can consider one to be a CIBIL defaulter if they have a score less than 600. Usually, people who don’t repay loans on time and default on other assets have a score of less than 600. The credit score is also adversely affected if you apply for multiple credit cards or even multiple loans within a short period.
So, how do urgent loans for CIBIL defaulters work? What must such people do to increase their chances of getting a loan? Let’s find out in the next section.
Who is considered to Be a Credit Defaulter?
When you are unable to meet your loan repayment commitments, there is a risk of being labelled a credit defaulter. Credit rating agencies don’t keep an official list of defaulters. Instead, they assess your creditworthiness based on your credit score, which influences your loan approvals.
A credit report reflects your financial discipline, which lenders use to measure your creditworthiness. Late payments can seriously hurt your credit score.
Defaulting on loans lands you on the credit defaulter list, indicating a low credit score. As a result, you could face ongoing challenges such as lenders declining future credit applications which can restrict your financial freedom over an extended period.
Methods to Secure Urgent Loan for Low Credit Score
Lenders might be apprehensive about offering urgent loans to CIBIL defaulters, so you must consider a few options to increase your chances of getting a loan. These options include:
- Apply with a co-signer: When you apply with a co-signer or guarantor with a high credit score, your chances of getting loan approval increases. It’s because they have a higher credit score which minimises the risk of your application being rejected.
- Borrow at higher rates of interest: As you have a poor CIBIL score, lenders will not entertain your loan application easily. However, taking a loan at higher interest rates may offset the risk.
- Use collateral to apply for loans: If you have any physical asset to use as collateral, lenders can be more open to offering loans. However, keep in mind that they may seize the property in case of non-repayment of loan.
- Try to improve your credit score: If you have existing debt, focus on making timely repayments. Consistent on-time payments can boost your credit score, improving your chances of securing loan approvals in the future.
- Explore other alternative options: If other options haven’t worked out well, consider taking a more traditional route such as peer-to-peer lending, where you can borrow money from acquaintances or friends through informal agreements
How to Apply for an Urgent Loan for CIBIL Defaulters Online?
Here’s a step-by-step process of how to get urgent loans for CIBIL defaulters online.
1. Research the lenders offering loans for CIBIL defaulters
Due to low credit scores, certain lenders may not offer urgent loans to CIBIL defaulters. But that doesn’t mean that every lender is against providing loans to them. That’s why you must research properly to see which lenders offer loans and which don’t.
2. Check the eligibility criteria
To apply for a personal loan with a low credit score, you’ll have to meet the following eligibility criteria-
- The applicant must be between 21 and 58 years of age
- The applicant must have a minimum monthly income of Rs. 15,000
- The applicant must have a minimum of one year of work experience Additionally, don’t forget to check for the interest rate, tenure, and other loan terms offered by the lender.
Once you know the lenders offering loans to CIBIL defaulters, the next step is to see what criteria they have set. But be aware that since you are applying as a CIBIL defaulter, there may also be other criteria, so look carefully.
Also, check for their interest rates, tenures, and other important terms and conditions you find necessary.
3. Gather all the documents
The lender will require you to submit a set of required documents. Make sure to collect the following documents and keep them updated-
- ID proof (Aadhaar card/ Passport/ Driving license/ Voter ID)
- Address proof (Aadhaar card/ Passport/ Voter ID/ Driving license)
- A copy of your salary slips for the last two months
- A copy of your bank statement for the last two months
- A certificate stating one year of continuous employment
4. Submit the application online
Once you have all the required documents, go to the lender’s website and fill out the application form. You will be required to fill in details like your name, address, loan needs, etc.
5. Await verification
Upon filling out the application, upload your documents. After this, the lender will verify your application and submitted documents. Once they are satisfied, they will approve your loan application. If not, you’ll have a list of reasons to check for resubmission.
Challenges for securing a loan for CIBIL defaulters
Borrowers with a poor credit history often encounter multiple hurdles when applying for loans. Here are some common problems faced by CIBIL defaulters:
1. Higher rates of interest
A poor credit score often leads to higher interest rates. Lenders consider those who have defaulted in past repayments as risky borrowers. As a safeguard against risk, financial institutions typically charge extra interest to offset the possibility of default. This makes borrowing money more expensive and difficult for defaulters.
2. Strict loan terms
In addition to increased interest rates, lending to CIBIL defaulters typically comes with more stringent loan conditions. These include shorter loan tenure, smaller principal amount, and limitations regarding its use. These terms are designed to minimise the lender’s risk but often restrict the flexibility and affordability of credit options for borrowers.
3. Fewer lender options
Limited borrowing options can be discouraging for individuals struggling with low credit scores. Most lenders avoid offering loans to clients with low or poor credit ratings. As a result, they may have to rely on alternative sources that come with higher costs and stricter loan terms, further complicating their finances.
4. Security requirement
In some cases, offering significant collateral can convince financial institutions to approve a loan for CIBIL defaulters. Collateral can include assets like houses, cars, or other valuables, which the lender can seize if you default on repayment. Such conditions exclude many defaulters from obtaining loans, especially those without significant assets to pledge.
5. Effects on future financial opportunities
For individuals flagged as CIBIL defaulters, obtaining a loan doesn’t mean their challenges are over. It may also impact your ability to secure future loans, obtain credit cards, and access favourable terms on other financial products.
How to Improve CIBIL Score After A Payment Default?
Getting a loan can be challenging if you have a low CIBIL score. However, there are few steps you can take to improve your credit score and boost your chances of loan approval. These include:
- Monitor your credit report frequently: Start by requesting and reviewing your credit report regularly. It gives you crucial insights into the factors that influence your score and helps you spot and fix any mistakes which can boost your rating quickly.
- Clear your outstanding dues: These may include outstanding credit card bills or existing loans. Make timely payments by setting regular reminders. If you are a defaulter, consolidating your debts can make repayments more manageable.
- Maintain a low credit utilisation: Aim to keep your credit utilisation below 30% of your total limit. Using less of your available credit makes you look financially stable and responsible in the eyes of lenders.
- Avoid acquiring multiple loans: When you apply for a loan, lenders perform a hard inquiry on your credit report, which can temporarily lower your credit score. Do thorough research before applying for new loans to check your eligibility for them.
- Diversify your credit: Having a diversified mix of loans, such as home loans, and unsecured loans, such as personal loans, can help you boost your credit score. A mixture of loans shows the lenders your ability to responsibly manage different types of credit, thereby making you a potentially low-risk borrower.
- Boost your credit history: Maintaining a long and consistent credit history reflects positively on your credit score. If you have older credit accounts that are duly paid off, do not close them as they reflect your long-term track record of handling credit responsibly.
- Seek professional debt counselling: If you’re struggling to handle your debts, consider getting help from a professional debt counsellor. They offer practical plans and strategies to help you manage your debts and gradually improve your credit score.
Conclusion
CIBIL scores are a crucial aspect of modern finance. Lenders depend on this number to ascertain an applicant’s creditworthiness. While urgent loans for CIBIL defaulters are still attainable, boosting your score is always a good idea.
Basic steps to increase your CIBIL scores, such as paying your loans on time and avoiding taking more than you need, can help immensely. This will also help you get an instant loan online without much trouble.
So if you are looking for an instant loan, why not try Tata Capital? We offer loans at competitive interest rates with minimal documentation. Furthermore, within four simple steps, you will get the necessary funds in no time.
FAQs
CIBIL defaulters can get a loan by offering collateral, applying with a co-signer, or availing of a loan at a higher interest rate with the lender. Alternatively, they must focus on improving their credit score or try alternative borrowing options like peer-to-peer lending.
While it can be difficult for CIBIL defaulters to get loans at favourable terms, they can try applying with a lender at a higher interest rate, get a co-signer, or consider pledging collateral.
CIBIL retains an individual’s financial and credit history for 7 years, after which details of any missed payments or defaults are removed.
You can improve a bad CIBIL score by repaying outstanding debts, maintaining low credit utilisation, and applying for a new loan within your limit. Opting for an affordable loan amount will make repayment easier on your finances.
You cannot build your credit score immediately. So, make sure to repay any outstanding debts, use your credit prudently, and apply for affordable loan amounts within your financial capacity to improve your credit score over time.
Credit bureaus generally retain records of payment defaults for 7 to 10 years, based on the nature of the default.
25 March 2025
9 mins read
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