Today, procuring an instant loan is not an issue since these are easily available from both traditional and non-traditional sources. However, obtaining a personal loan when the borrower has no CIBIL score or credit history, or a low score, can be challenging for some. For such bases, borrowers need to know they can get an instant loan without a CIBIL score.
CIBIL refers to the 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 both individuals and companies. When either category seeks loans or credit cards, the bank or other financial entity first checks the applicant’s credit history before approving or declining the request.
What’s a Credit Score?
To elaborate, the credit score is a three-digit number ranging between 300 and 900 that reflects the prospective borrower’s creditworthiness. This score is derived from the past borrowing, spending and repayment patterns of borrowers, which is shared by financial institutions with these credit bureaus.
The above facts highlight why credit scores are important for procuring loans and credit cards. But it is possible to avail of financial products even without a credit score or adequate credit history. The various ways to go about this are outlined below for the benefit of readers.
9 Ways To Get An Instant Loan With a Credit Score
Choose Collateral-based Loans
Instant or personal loans do not require any collateral or security. This is only the case, however, if a borrower enjoys a high or good credit score. If this is lacking, borrowers can still avail loans by opting for secured loans or those backed by collateral such as shares, property, fixed deposits, jewelry, etc.
If a borrower’s assets are pledged as security, 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 the terms, interest rate, tenure and other conditions.
If the borrower is unable to repay the loan at some point down the line, the lender then reserves the right to seize the collateral or pledged assets to recover the outstanding loan amount. Therefore, it is best to pay the equated monthly instalments (EMIs) on time every month.
Find a Guarantor
The best way to procure a loan without a credit score is to find someone to act as a guarantor. A family member, friend, colleague or confidante could be a guarantor. Of course, the guarantor should have a healthy credit score, which will ensure the applicant’s loan will be approved without much difficulty.
But finding a guarantor may only be possible if the applicant enjoys a trustworthy reputation.
Apply with a Co-applicant
A co-applicant with a stable income is another way of ensuring an instant loan is granted without undue hassle. The co-applicant, however, must be a family member who is informed in advance about the applicant’s intention of opting for an instant loan.
Both a guarantor and co-applicant assure the lender that in case the borrower defaults for any reason, the outstanding loan amount can always be recovered from the guarantor or co-applicant.
In both cases, the guarantor or co-applicant will need to meet the requisite know-your-customer (KYC) and eligibility criteria just like the applicant.
Prove Your Creditworthiness
If an applicant has not borrowed before or only used credit cards rarely, the person won’t hold a proper credit history. Yet, lenders will overlook these issues if the person has a stable and steady source of income. This can be proved via salary slips and bank statements.
Once a lender is confident about the applicant’s income proof and the ability to pay EMIs on time each month, his or her creditworthiness will be established.
Apply for a Lower Amount
If an applicant has a low credit score or lacks the same, the probability 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 offset 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 improve his or her credit score.
Obtain a History not Available (NA) or No History (NH) on the Credit Report
NA or NH on a person’s credit report indicates there was no credit activity in the past three years or more. Therefore, before applying for a loan, applicants should check their credit report, which can be obtained free 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 lenders. Thereafter, a loan may be approved.
Notwithstanding this, a lender may charge a somewhat higher rate of interest to account for any additional risk, given the absence of credit activity. Or they may consider other factors and offer an instant loan at the regular interest rate.
Ascertain Eligibility in Advance
Although crucial, this factor is typically ignored by most prospective borrowers who apply for loans left, right and center, hoping it will do the trick despite the low or no credit score. But such a strategy can be counterproductive as it triggers hard inquiries from lenders, further reducing their chances.
Hard inquiries are those where lenders check a borrower’s credit score before approving a loan. When a borrower makes multiple applications, it ends in numerous hard inquiries to credit bureaus, making it seem the applicant is desperate for credit. Lenders are then reluctant to approve loans.
Applicants with low credit scores then suffer since the hard inquiry further reduces their credit status. Even if they do get credit, this may be at a higher rate of interest due to the hard inquiries. Therefore, before applying, borrowers should make discrete inquiries online about where they meet the criteria.
Note that lenders, whether brick-and-mortar or digital, have diverse eligibility criteria. Checking these conditions beforehand helps in understanding what suits a borrower and what doesn’t. Once this is clear, an applicant should then apply only to a specific lender to boost their chances of approval.
Approach Non-banking Finance Companies (NBFCs) or Housing Finance Companies (HFCs)
Generally, legacy lenders such as banks are averse to taking risks by lending to borrowers lacking proper credit history. In such situations, it’s best to approach NBFCs.
While NBFCs will offer loans to those in the higher-risk categories, borrowers will be charged more interest for the greater risk involved.
Opt for Online Lenders
As mentioned earlier, traditional lenders are averse to risk-taking. While NBFCs may be willing to offer loans to those without credit scores, stringent terms and conditions could prevent prospective applicants from being eligible for their loans.
If this is the case, online lenders or fintech firms can be approached to procure an instant loan. Fintech firms use digital means to check an applicant’s KYC compliance and are more receptive to offering collateral-free loans to borrowers without a credit history.
