A Loan Against Property (LAP) is a type of secured loan that allows individuals to borrow money by pledging their residential or commercial property as collateral. This financial product is widely preferred due to its flexibility, lower interest rates, and higher loan amounts compared to unsecured loans. Whether for business expansion, medical emergencies, higher education, or other personal needs, LAP offers multiple advantages. In this article, we will discuss the top benefits of taking a loan against property.

1. Lower Interest Rates                                                                             

One of the biggest advantages of a loan against property is its lower interest rate compared to unsecured loans such as personal loans or credit card debt. Since it is a secured loan, lenders perceive it as a lower-risk financial product, leading to more attractive interest rates. Generally, interest rates on LAP range between 8% and 12%, whereas personal loan interest rates can go as high as 24%.

2. Higher Loan Amount

Since the loan is backed by a tangible asset, lenders offer higher loan amounts depending on the property’s market value. Financial institutions usually provide loans ranging from 50% to 70% of the property’s current market value. This makes LAP a great option for funding large expenses such as business expansion, weddings, or medical treatments.

3. Longer Repayment Tenure

Loan against property comes with a longer repayment tenure, which can extend up to 15-20 years, depending on the lender’s policies. This long tenure allows borrowers to opt for lower EMIs, reducing their monthly financial burden and making loan repayment more manageable.

4. Multipurpose Loan Usage

Unlike home loans or education loans, which come with specific usage conditions, a loan against property can be used for multiple purposes. Whether it is for personal needs, medical emergencies, business expansion, debt consolidation, or even funding a child’s higher education abroad, LAP offers unrestricted usage.

5. Quick Loan Approval & Disbursal

With digitization and streamlined processes, financial institutions ensure faster loan approvals and disbursals for LAP. If all the required documents are in place, the loan amount can be disbursed within a few days to a couple of weeks, making it a great option for urgent financial needs.

6. Retain Ownership of Property

Unlike selling a property to raise funds, LAP allows you to retain ownership while utilizing its financial value. The borrower can continue using the property for personal or rental purposes while benefiting from the loan.

7. Balance Transfer Facility

Many banks and financial institutions offer a balance transfer facility, enabling borrowers to shift their outstanding LAP to another lender at a lower interest rate. This helps in reducing the overall repayment burden and making loan servicing more cost-effective.

8. Tax Benefits

Though LAP does not offer direct tax benefits like home loans, borrowers can still avail tax benefits if the loan amount is used for specific purposes, such as business expansion or property renovation. Under Section 37(1) of the Income Tax Act, expenses related to business expansion using LAP are tax-deductible.

9. Minimal Documentation

Unlike other financial products, a loan against property requires minimal documentation, such as proof of identity, income proof, property documents, and a few other necessary papers. This makes the loan application process hassle-free and less time-consuming.

10. Improves Credit Score

Regular and timely repayment of a loan against property can significantly improve your credit score. Since LAP comes with structured repayment options, it provides an opportunity for borrowers to maintain a healthy credit history, which can be beneficial for availing future loans at better terms.

11. Flexible Loan Repayment Options

Most lenders offer flexible repayment options, allowing borrowers to opt for customized repayment structures based on their financial situation. Some institutions even offer overdraft facilities, where interest is charged only on the utilized loan amount.

12. Better Financial Planning

Since LAP offers low EMIs and longer tenures, it enables better financial planning. Borrowers can allocate funds towards other investments while repaying the loan, ensuring a stable financial future.

Conclusion

A loan against property is an excellent financial tool that offers multiple benefits, including lower interest rates, higher loan amounts, flexible repayment options, and unrestricted usage. It is an ideal choice for individuals looking for substantial financial assistance without liquidating their assets. However, borrowers should assess their repayment capacity and compare lenders to ensure they get the best deal.

If you own a property and need a large sum of money, taking a loan against property can be a strategic financial move, offering liquidity while retaining ownership of your asset.

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Introduction

Your credit report is a crucial document that lenders use to assess your financial health. It determines your CIBIL score, which influences your eligibility for loans and credit cards. Credit Report Errors: How to Dispute and Improve Your Score However, errors in your credit report can negatively impact your score, leading to loan rejections and unfavorable credit terms.

Understanding how to identify, dispute, and rectify credit report errors is essential for maintaining a good credit score. This article will guide you through the process of disputing errors and improving your credit score.

Common Credit Report Errors

Errors in a credit report can arise due to various reasons, such as clerical mistakes, identity theft, or incorrect reporting by financial institutions. Here are some of the most common errors:

1. Incorrect Personal Information
   • Misspelled name
   • Wrong address or phone number
   • Incorrect PAN or Aadhaar details
2. Errors in Account Details
   • Accounts that do not belong to you
   • Closed accounts still showing as open
   • Duplicate accounts
3. Incorrect Credit Information
   • Payments marked as late despite being paid on time
   • Incorrect outstanding balances
   • Wrong credit limits
4. Fraudulent Accounts or Transactions
   • Accounts you did not open
   • Unauthorized transactions
5. Outdated Negative Information
   • Defaulted loans or late payments that should no longer be on your report
   • Incorrect settlements or loan closures

How to Dispute Credit Report Errors

If you find an error on your credit report, follow these steps to dispute it effectively:

Step 1: Get a Copy of Your Credit Report

You can obtain a free credit report from CIBIL once a year or subscribe to a paid plan for regular updates. Review your report thoroughly to identify any inaccuracies.

Step 2: Gather Supporting Documents

Before filing a dispute, collect relevant documents to support your claim. These may include:

• Bank statements
• Loan repayment receipts
• Credit card statements
• Identity proof (Aadhaar, PAN, passport)

Step 3: Raise a Dispute with CIBIL

CIBIL allows you to dispute errors online through their Dispute Resolution Portal. Follow these steps:

1. Visit the CIBIL website and log in to your account.
2. Navigate to the Dispute Resolution Section.
3. Fill in the Dispute Form, selecting the incorrect entry.
4. Attach supporting documents and submit your request.

Step 4: Follow Up with Lenders

If the error originates from a bank or financial institution, contact them directly and request correction. They will verify the mistake and inform CIBIL to update your report.

Step 5: Track Your Dispute Status

CIBIL typically takes 30 to 45 days to investigate disputes. You can check your dispute status online through your CIBIL account.

How to Improve Your Credit Score After Correcting Errors

Once your dispute is resolved and your credit report is corrected, you should take additional steps to improve your CIBIL score further:

1. Make Timely Payments

Payment history makes up 35% of your CIBIL score. Ensure you pay all your credit card bills and loan EMIs on time.

2. Reduce Your Credit Utilization Ratio

Using a high percentage of your available credit can negatively impact your score. Keep your credit utilization below 30% to improve your creditworthiness.

3. Avoid Multiple Credit Applications

Each loan or credit card application results in a hard inquiry, which can lower your score. Only apply for new credit when necessary.

4. Maintain a Healthy Credit Mix

A balance of secured (home, car loans) and unsecured (credit cards, personal loans) credit helps in building a strong credit profile.

5. Keep Old Accounts Open

The length of your credit history contributes to your score. Closing old accounts can reduce your credit age and negatively impact your score.

6. Check Your Credit Report Regularly

Monitor your credit report at least once a year to catch errors early and prevent fraudulent activities.

Conclusion

Credit report errors can damage your financial reputation, making it difficult to secure loans and credit at favorable rates. By regularly reviewing your credit report, promptly disputing inaccuracies, and practicing good credit habits, you can maintain a strong CIBIL score and enjoy better financial opportunities.

Taking control of your credit health today will ensure a secure financial future. Make it a habit to check your credit report and correct any errors before they affect your borrowing capacity.

The post Credit Report Errors: How to Dispute and Improve Your Score appeared first on In Fintech.

Introduction

Your CIBIL score plays a crucial role in determining your creditworthiness. A low CIBIL score can limit your access to loans, credit cards, and other financial products. Many individuals with a low score wonder: How long does it take to improve a CIBIL score? The answer depends on various factors, including your financial behavior and credit management strategies.

In this article, we will explore how long it takes to improve a low CIBIL score, factors influencing the timeline, and actionable steps to accelerate the process.

Understanding CIBIL Score and Its Impact

The CIBIL score ranges from 300 to 900. A score of 750 or above is considered excellent, while a score below 650 is regarded as low. Banks and financial institutions rely on this score to assess your creditworthiness before approving loans or credit cards.

Factors Affecting CIBIL Score:

1. Payment History (35%) – Timely repayment of loans and credit card bills.
2. Credit Utilization Ratio (30%) – The percentage of available credit used.
3. Credit History Length (15%) – The duration for which credit accounts have been active.
4. Credit Mix (10%) – A balance between secured (home, auto loans) and unsecured credit (personal loans, credit cards).
5. New Credit Inquiries (10%) – The number of recent credit applications.

How Long Does It Take to Improve a Low CIBIL Score?

Improving a low CIBIL score is not an overnight process. It depends on the severity of the damage and the corrective measures taken. Below is a general timeline based on different credit scenarios:

1. Minor Credit Issues (1–3 Months)

If your score is slightly low due to minor issues such as a high credit utilization ratio or a few late payments, improvements can be seen within 1 to 3 months after corrective actions.

Steps to Improve:

• Reduce your credit utilization ratio to below 30%.
• Pay off any outstanding dues immediately.
• Ensure timely payments on all credit accounts.

2. Moderate Credit Issues (6–12 Months)

If your low score is due to multiple missed payments or a default on a small loan, it may take 6 to 12 months to see a significant improvement after making consistent payments.

Steps to Improve:

• Set up auto-payments to avoid missing due dates.
• Pay off any settled or overdue accounts.
• Maintain low credit card usage.

3. Major Credit Issues (12–24 Months)

If you have loan defaults, multiple missed payments, or high debt levels, your credit score might take 12 to 24 months to recover fully.

Steps to Improve:

• Negotiate with lenders for loan settlements and ensure they update your credit report.
• Start using a secured credit card to rebuild your credit history.
• Take small personal loans and repay them on time.
• Check your credit report regularly to correct any errors.

4. Severe Credit Damage (2–5 Years)

If you have a loan written off, bankruptcy, or long-term defaults, it can take 2 to 5 years to rebuild a strong CIBIL score. Negative records like loan write-offs remain in your credit history for seven years, affecting your creditworthiness.

Steps to Improve:

• Work with a credit counselor for a structured repayment plan.
• Gradually rebuild your score with responsible credit behavior.
• Avoid new credit inquiries until your score stabilizes.

Effective Ways to Improve Your CIBIL Score Faster

1. Pay Your Bills on Time

Late payments severely impact your CIBIL score. Set up automatic payments or reminders to ensure you never miss a due date.

2. Reduce Your Credit Utilization Ratio

Keeping your credit usage below 30% of your total limit shows financial discipline and positively impacts your score.

3. Avoid Applying for Multiple Loans at Once

Frequent loan applications trigger hard inquiries, which can temporarily lower your score. Only apply for credit when necessary.

4. Maintain a Mix of Credit Types

A good credit mix of secured and unsecured loans helps improve your score. Avoid relying only on credit cards.

5. Check Your Credit Report Regularly

Errors in your credit report can unfairly reduce your score. Dispute any incorrect information with CIBIL to ensure accuracy.

6. Keep Old Credit Accounts Open

The length of your credit history matters. Avoid closing old credit cards, as they contribute positively to your score.

7. Consider a Secured Credit Card

If you have a very low score, a secured credit card (against a fixed deposit) can help rebuild credit with minimal risk.

How to Monitor Your CIBIL Score Progress

A. Use CIBIL’s Free Credit Score Check

CIBIL offers a free credit score check once a year. Regular monitoring helps track improvements.

B. Subscribe to Credit Monitoring Services

Several financial institutions provide real-time alerts about changes to your credit score and report.

C. Keep a Record of Payments and Loans

Maintaining a personal financial log helps you stay aware of due dates and outstanding balances.

Conclusion

Improving a low CIBIL score takes time and financial discipline. Minor issues can be fixed within a few months, while severe damage may take years to recover. However, with consistent efforts, timely payments, reduced credit utilization, and responsible credit behavior, you can gradually boost your credit score and enhance your financial opportunities.

By following the strategies outlined in this article, you can improve your CIBIL score effectively and gain better access to loans, credit cards, and favorable financial deals in the future.

The post How Long Does It Take to Improve a Low CIBIL Score? appeared first on In Fintech.

Introduction

Your CIBIL score is a critical factor in determining your creditworthiness. It influences your ability to secure loans, obtain credit cards, and even impacts financial opportunities like rental agreements and job applications. Many individuals with a low CIBIL score wonder if paying off old debts can improve their score. The simple answer is: Yes, it can, but the extent and speed of improvement depend on several factors.

This article explores how paying off old debts affects your CIBIL score, why it matters, and what strategies you can use to boost your credit standing effectively.

Understanding the CIBIL Score and Its Components

A CIBIL score is a three-digit number ranging from 300 to 900. A higher score signifies better creditworthiness. The score is calculated based on the following factors:

1. Payment History (35%) – Your history of paying loans and credit card bills on time.
2. Credit Utilization Ratio (30%) – The amount of credit you use compared to your credit limit.
3. Credit History Length (15%) – The duration for which you have held credit accounts.
4. Credit Mix (10%) – A balance of secured (home, auto loans) and unsecured loans (personal loans, credit cards).
5. New Credit Inquiries (10%) – The number of times you apply for loans or credit in a short period.

Since payment history and credit utilization are the most significant factors, paying off old debts directly influences your CIBIL score.

How Paying Off Old Debts Improves Your CIBIL Score

1. Clearing Outstanding Payments Enhances Payment History

If you have missed payments or defaulted on a loan, those negative remarks remain on your credit report for several years. By clearing your overdue payments, you indicate to lenders that you are financially responsible. Although the record of late payments remains for a while, settling the debt improves your score over time.

Tip to Improve:

• Prioritize overdue debts and clear them as soon as possible.
• Negotiate with lenders for settlement options if full payment is not immediately possible.

2. Reducing Credit Utilization Ratio Positively Impacts Your Score

If you have maxed out your credit cards or are using a significant portion of your available credit, it raises a red flag for lenders. Paying off credit card dues reduces your credit utilization ratio, making you appear less risky to lenders and improving your score.

Tip to Improve:

• Keep your credit utilization ratio below 30% for an optimal impact on your score.
• Request a credit limit increase while maintaining low usage.

3. Settling Old Loans Removes Defaults from Credit Report

If you have defaulted on a loan and it has been classified as a non-performing asset (NPA), it severely impacts your CIBIL score. Paying off these loans or negotiating a one-time settlement can remove the default status, boosting your credit profile.

Tip to Improve:

• Contact your bank or lender to discuss repayment options.
• If you settle the loan, ensure the lender updates your CIBIL report correctly.

4. Avoiding Legal Action and Collection Agency Harassment

Old unpaid debts may be transferred to collection agencies, leading to continuous follow-ups and legal notices. These negative actions can further reduce your CIBIL score. By clearing these debts, you avoid potential legal issues and improve your financial standing.

Tip to Improve:

• If your debt is with a collection agency, negotiate a settlement and request a No Dues Certificate once paid.
• Ensure your credit report is updated after making the payment.

5. Improving Creditworthiness for Future Loan Approvals

A poor CIBIL score limits your access to loans and credit facilities. Lenders prefer customers with a score above 750. Clearing past debts improves your financial credibility, making it easier to get approval for loans with better interest rates.

Tip to Improve:

• Start using a secured credit card (issued against a fixed deposit) to rebuild credit.
• Take small loans and repay them on time to establish a positive credit history.

Strategies to Pay Off Old Debts Efficiently

A. Prioritize High-Interest Debts First

High-interest debts, such as credit cards and payday loans, should be paid off first to reduce the financial burden. Focus on clearing these accounts before moving on to lower-interest debts.

B. Opt for a Debt Consolidation Loan

If you have multiple debts, consider a debt consolidation loan to combine them into a single payment with a lower interest rate. This simplifies repayment and helps improve your credit score.

C. Negotiate with Lenders for Settlements

If full repayment is difficult, you can negotiate a settlement amount with your lender. Ensure that after payment, the lender updates your credit report with a “Closed” or “Settled” status instead of “Default”.

D. Set Up Automatic Payments to Avoid Future Defaults

Once you have cleared your debts, set up automatic payments for your credit card and loan EMIs to ensure you never miss a payment again.

E. Check Your Credit Report Regularly

Errors in your credit report can negatively impact your score. After paying off old debts, check your credit report and dispute any incorrect information.

How Long Does It Take to See Improvement in Your CIBIL Score?

The time required for your CIBIL score to improve depends on the type of debt you clear and your overall financial habits:

• Credit card payments: Positive effects can be seen within one to three months.
• Loan settlements: If marked as “Closed”, improvement may take six months to a year.
• Default removals: Severe delinquencies can take two to three years to recover completely.

Conclusion

Paying off old debts is one of the most effective ways to improve your CIBIL score. While it may not provide instant results, it sets the foundation for a strong credit profile. By making timely payments, reducing credit utilization, and maintaining a good credit mix, you can steadily rebuild your creditworthiness.

If you have outstanding dues, take proactive steps to settle them, negotiate with lenders, and maintain disciplined financial habits. Over time, these efforts will reflect positively on your CIBIL score, opening doors to better financial opportunities and a stress-free credit life.

The post Can Paying Off Old Debts Improve Your CIBIL Score? appeared first on In Fintech.

Introduction

Your CIBIL score is a crucial factor that determines your creditworthiness. It influences your ability to secure loans, obtain credit cards, and access financial products. Among various factors that impact your CIBIL score, credit card usage plays a significant role. How Credit Card Usage Affects Your CIBIL Score Using a credit card wisely can enhance your score, while mismanagement can lead to a decline in your credit standing.

In this article, we will explore how credit card usage affects your CIBIL score and discuss effective ways to improve it.

Understanding CIBIL Score and Its Components

The CIBIL score is a three-digit number ranging from 300 to 900, with a higher score indicating better creditworthiness. A score above 750 is considered excellent and improves your chances of loan approvals. This score is determined based on several factors:

1. Payment History (35%) – Timely repayment of loans and credit card bills.
2. Credit Utilization Ratio (30%) – The amount of credit used in proportion to the total credit limit.
3. Length of Credit History (15%) – The duration of your credit accounts.
4. Credit Mix (10%) – A healthy mix of secured (home, auto loans) and unsecured credit (personal loans, credit cards).
5. New Credit Inquiries (10%) – The number of loan and credit applications you make.

How Credit Card Usage Affects Your CIBIL Score

1. Timely Payments Boost Your Score

One of the most important factors affecting your CIBIL score is your payment history. Paying your credit card bills on time ensures that your score remains intact and gradually improves. Missing payments or making late payments can negatively impact your credit score and result in penalties or increased interest rates.

Tip to Improve:

• Set up automatic payments or reminders to avoid missed due dates.
• Always pay at least the minimum due amount on time.

2. High Credit Utilization Ratio Lowers Your Score

Your credit utilization ratio (CUR) is the amount of credit you use compared to your available credit limit. A high CUR indicates over-dependence on credit, which can lower your CIBIL score.

Tip to Improve:

• Keep your credit utilization below 30% of your total credit limit.
• If possible, request a credit limit increase to maintain a low utilization ratio.

3. Multiple Credit Card Applications Can Hurt Your Score

Each time you apply for a new credit card, lenders conduct a hard inquiry on your credit report. Too many hard inquiries within a short period can signal financial distress and reduce your CIBIL score.

Tip to Improve:

• Avoid applying for multiple credit cards in a short span.
• Only apply for new credit when necessary.

4. Old Credit Cards Help Build a Stronger Credit History

The length of your credit history accounts for 15% of your CIBIL score. Keeping older credit card accounts open contributes to a longer credit history, which positively impacts your score.

Tip to Improve:

• Do not close old credit cards, even if you no longer use them frequently.
• Use old credit cards occasionally to keep them active.

5. Diverse Credit Mix Strengthens Your Score

A balanced mix of credit types, such as credit cards, personal loans, and home loans, demonstrates financial responsibility. Having only one type of credit account may limit the growth of your credit score.

Tip to Improve:

• Maintain a mix of both secured and unsecured loans.
• Use different types of credit responsibly to build a strong profile.

6. Defaulting on EMIs or Exceeding Credit Limits Damages Your Score

If you default on your credit card payments or exceed your assigned credit limit, it can severely impact your CIBIL score. Late payments and over-the-limit spending indicate financial mismanagement, which may reduce your creditworthiness.

Tip to Improve:

• Always make EMI payments on time.
• Avoid spending more than your assigned credit limit.

7. Checking Your Credit Report Regularly Helps Maintain a Healthy Score

Errors in your credit report can negatively impact your CIBIL score. Sometimes, outdated information, incorrect loan details, or unauthorized transactions might be present on your credit report.

Tip to Improve:

• Check your credit report at least once a year.
• Dispute any incorrect entries to rectify errors.

Additional Strategies to Improve Your CIBIL Score

A. Convert Large Purchases into EMIs

If you make large purchases using a credit card, consider converting them into EMIs to avoid high credit utilization. This allows for structured repayments without burdening your monthly budget.

B. Use Multiple Credit Cards Wisely

If you own multiple credit cards, distribute expenses among them to keep the credit utilization ratio low on each card.

C. Opt for a Secured Credit Card

If you have a low CIBIL score, applying for a secured credit card (issued against a fixed deposit) can help rebuild your credit history. Timely payments on a secured card will reflect positively on your credit score.

D. Avoid Closing Credit Cards Too Soon

Closing a credit card account reduces your total available credit, thereby increasing your credit utilization ratio. Keep old accounts open to maintain a long credit history.

E. Pay Off Outstanding Debts

If you have outstanding dues on your credit card, prioritize clearing them to improve your CIBIL score. Partial payments can result in interest accumulation and impact your credit standing.

Conclusion

Credit card usage has a significant impact on your CIBIL score, and managing your credit responsibly is crucial for maintaining financial health. By making timely payments, keeping credit utilization low, and diversifying your credit mix, you can improve your CIBIL score over time.

Regularly reviewing your credit report, avoiding unnecessary loan inquiries, and staying disciplined in credit management will ensure long-term financial stability. Implement these strategies today to build a strong credit profile and secure better financial opportunities in the future!

The post How Credit Card Usage Affects Your CIBIL Score and Ways to Improve It appeared first on In Fintech.

Introduction

A low credit score often creates barriers for individuals seeking loans from banks and financial institutions. Many lenders consider credit scores as a key factor in determining eligibility for loans. Government Loan Schemes for People with Low Credit Scores However, the Government of India has introduced several loan schemes to support individuals, entrepreneurs, and small businesses, even those with low credit scores.  These government-backed loan schemes provide financial assistance with lower interest rates, reduced collateral requirements, and flexible repayment terms.

This article explores government loan schemes available for individuals with low credit scores, their eligibility criteria, benefits, and how to apply for them.

Why Consider Government Loan Schemes?

Government loan schemes are ideal for those with low credit scores because they offer:

• Lower Interest Rates compared to private lenders.
• Relaxed Credit Score Requirements where a low CIBIL score may not be a disqualifying factor.
• Minimal or No Collateral required in many schemes.
• Longer Repayment Tenures to ease financial burden.
• Government Guarantees that reduce the risk for lenders, increasing approval chances.

Best Government Loan Schemes for People with Low Credit Scores

1. Pradhan Mantri Mudra Yojana (PMMY)

The MUDRA (Micro Units Development and Refinance Agency) Yojana is designed to provide loans to small and micro-businesses, particularly those in non-corporate sectors. Even individuals with low CIBIL scores can apply, as the scheme focuses more on business viability than credit history.

Key Features:

• Loan amount: Up to ₹10 lakh
• No collateral required
• Three categories:
  • Shishu (Up to ₹50,000)
  • Kishore (₹50,001 – ₹5 lakh)
  • Tarun (₹5 lakh – ₹10 lakh)
• Interest rates vary based on the lending institution
• Available through banks, NBFCs, and microfinance institutions

Eligibility:

• Individuals looking to start or expand small businesses
• No strict credit score requirements
• Must have a viable business plan

2. Stand-Up India Scheme

This scheme supports SC/ST entrepreneurs and women entrepreneurs in setting up new businesses. Even applicants with low credit scores can qualify if they meet the other eligibility criteria.

Key Features:

• Loan amount: ₹10 lakh to ₹1 crore
• 75% of the project cost covered by the loan
• Focus on greenfield enterprises (new businesses)
• Long repayment tenure of up to 7 years
• Partial credit guarantee available from Credit Guarantee Fund

Eligibility:

• Must be a SC/ST or woman entrepreneur
• Business should be in the manufacturing, service, or trading sector
• No strict credit score requirement
• Must contribute at least 10% of the project cost

3. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)

The CGTMSE scheme is aimed at helping micro and small enterprises (MSEs) get collateral-free loans, even with low CIBIL scores.

Key Features:

• Loan amount: Up to ₹2 crore
• No requirement for third-party guarantees or collateral
• Government provides a credit guarantee to the lender
• Available through banks and NBFCs

Eligibility:

• Micro and small enterprises (existing or new)
• No major defaults in financial history
• Business should be viable with proper documentation

4. Prime Minister’s Employment Generation Programme (PMEGP)

PMEGP is a credit-linked subsidy scheme that provides financial assistance to individuals for starting small businesses.

Key Features:

• Loan amount: Up to ₹25 lakh for manufacturing units and ₹10 lakh for service units
• Government subsidy:
  • 25-35% subsidy for general category applicants
  • 35-50% subsidy for SC/ST, OBC, women, minorities, and physically disabled applicants
• Loan tenure of 3 to 7 years
• No stringent credit score requirement

Eligibility:

• Minimum education qualification: Class 8 pass
• Should not have availed benefits from other government self-employment schemes
• Business must be in the manufacturing or service sector

5. Dairy Entrepreneurship Development Scheme (DEDS)

For those interested in dairy farming, NABARD provides subsidized loans under the DEDS program.

Key Features:

• Loan amount: Up to ₹10 lakh
• Subsidy of 25-33% of the total project cost
• No strict credit score requirement
• Encourages self-employment in rural areas

Eligibility:

• Farmers, entrepreneurs, NGOs, and cooperatives
• Must use funds for dairy farming, cold storage, or milk processing units

6. Kisan Credit Card (KCC) Scheme

KCC provides short-term and long-term financial assistance to farmers, even those with a low credit score.

Key Features:

• Loan amount: Up to ₹3 lakh
• Interest rates start as low as 4% per annum
• No need for high credit scores
• Flexible repayment tenure aligned with crop cycles

Eligibility:

• Must be a farmer or agricultural worker
• Should have agricultural land or be involved in farming activities

How to Apply for Government Loan Schemes

Applying for government loan schemes is straightforward and can be done through banks, NBFCs, or online government portals.

Steps to Apply:

1. Research the right loan scheme based on your needs (business, agriculture, self-employment, etc.).
2. Gather required documents, including:
   • Aadhaar card & PAN card
   • Business plan (if applicable)
   • Address proof & income proof
   • Bank account details
3. Visit the nearest bank or NBFC that offers government loans.
4. Apply online through portals such as:
   • www.mudra.org.in (for MUDRA loans)
   • www.standupmitra.in (for Stand-Up India loans)
   • www.kviconline.gov.in (for PMEGP loans)
5. Wait for loan approval and subsidy processing.
6. Receive the loan amount in your bank account.

Conclusion

For individuals with low credit scores, government loan schemes offer a lifeline to financial stability. These loans help in starting businesses, expanding self-employment, or securing emergency funds without facing high interest rates or strict credit score requirements.

Before applying, ensure you meet the eligibility criteria, have the necessary documents, and compare different schemes to find the one best suited to your needs. With the right approach, these government initiatives can provide crucial financial support and help you build a strong credit history for future borrowing.

If you’re struggling with a low CIBIL score, consider one of these government-backed loan schemes to get the financial support you need!

The post Government Loan Schemes for People with Low Credit Scores appeared first on In Fintech.

Introduction

A low CIBIL score can make it difficult to access traditional loans, but many people are unaware that they can still qualify for a credit card loan despite having a poor credit history. Credit card loans, also known as loans against credit limits or cash advances, How to Apply for a Credit Card Loan with a Low CIBIL Score offer an alternative borrowing option for those struggling to secure funds from banks or NBFCs due to their low credit scores.

This article will guide you through how to apply for a credit card loan with a low CIBIL score, the eligibility criteria, best practices, and alternative options available.

Understanding Credit Card Loans

A credit card loan is a loan that a bank or financial institution provides using your credit card limit or as an additional loan based on your credit card usage. These loans are typically unsecured and can be used for any purpose, such as medical emergencies, debt consolidation, or unexpected expenses.

Types of Credit Card Loans

1. Loan Against Credit Limit – The bank converts a portion of your existing credit limit into a loan.
2. Instant Pre-Approved Loan – Banks offer loans above the available credit limit, based on your past repayment history.
3. Credit Card Cash Advance – A facility that allows you to withdraw cash from an ATM using your credit card, subject to high interest and fees.

Can You Get a Credit Card Loan with a Low CIBIL Score?

Yes, it is possible to get a credit card loan even with a low CIBIL score. However, your options may be limited, and the interest rates could be higher. Some factors that can increase your chances include:

• Existing Credit Card Relationship – If you have a credit card with the bank, they may approve your loan despite a low credit score.
• Stable Income – Banks consider your monthly income and job stability over credit history in some cases.
• Secured Credit Cards – Holding a secured credit card backed by an FD increases approval chances.
• Good Transaction History – If you consistently pay your credit card bills on time, banks may offer you a loan despite a low CIBIL score.

How to Apply for a Credit Card Loan with a Low CIBIL Score

Step 1: Check Your Credit Card Eligibility

• Log in to your credit card net banking portal or mobile app.
• Look for pre-approved loan offers.
• If no loan offer is visible, contact your bank’s customer support to check eligibility.

Step 2: Compare Loan Offers

• Different banks offer varying interest rates and tenures.
• Compare processing fees, interest rates, and repayment periods.
• Choose a loan that fits your repayment capability.

Step 3: Apply Online or Offline

• Online: Apply through the net banking portal or mobile app.
• Offline: Visit the nearest branch and fill out the loan application form.
• Submit KYC documents (if required) such as Aadhaar card, PAN card, and income proof.

Step 4: Loan Disbursal

• Once approved, the loan amount is credited directly to your bank account or added to your credit card limit.
• Processing usually takes 24 to 48 hours.

Interest Rates and Fees for Credit Card Loans

Since these loans are typically unsecured, interest rates are higher compared to personal loans. Here’s what you should be aware of:

• Interest Rates: Varies between 12% to 36% per annum.
• Processing Fee: Ranges from 1% to 3% of the loan amount.
• Late Payment Charges: Missing an EMI can lead to penalties and additional interest.
• Prepayment Charges: Some banks charge 2% to 5% on early loan closure.

Risks of Taking a Credit Card Loan with a Low CIBIL Score

While a credit card loan can be a lifesaver, there are risks involved, especially for those with a low CIBIL score:

1. High Interest Rates

• Interest rates on credit card loans are higher than personal loans.
• Repayment burden can increase significantly if not managed properly.

2. Increased Credit Utilization

• A high credit utilization ratio negatively impacts your CIBIL score.
• Keeping utilization below 30% of your limit is advisable.

3. Debt Cycle Risk

• Borrowing beyond your repayment capacity can lead to a debt trap.
• Ensure you have a solid repayment plan before taking a credit card loan.

4. Impact on Future Loan Approvals

• Over-reliance on credit card loans may lower your chances of getting a home or auto loan in the future.

Best Practices to Manage a Credit Card Loan Responsibly

If you decide to take a credit card loan, follow these best practices to minimize risks:

1. Borrow Only What You Need

• Avoid over-borrowing, even if the bank offers a higher loan amount.
• Calculate your repayment capacity before applying.

2. Choose a Longer Tenure for Lower EMI

• Opt for a longer repayment period to reduce monthly EMI stress.
• However, note that longer tenure increases overall interest payout.

3. Pay EMIs on Time

• Set up auto-debit or reminders to avoid late fees.
• Timely payments improve your CIBIL score over time.

4. Avoid Using Credit Card for Additional Spending

• If you take a loan against your credit card, avoid making additional high-value purchases.
• This prevents an increase in your credit utilization ratio.

5. Compare Other Loan Options

• Consider NBFC personal loans, secured loans, or salary advances before opting for a credit card loan.

Alternative Loan Options for Low CIBIL Score Holders

If you find that a credit card loan is not the best fit, here are some alternative options:

1. Personal Loans from NBFCs

• Many NBFCs (Non-Banking Financial Companies) provide personal loans even with a low CIBIL score.
• Interest rates are lower than credit card loans.

2. Loan Against Fixed Deposit

• Borrow up to 90% of your FD amount at lower interest rates.
• Easy to get approved since the loan is secured against your deposit.

3. Gold Loan

• A secured loan that offers instant cash with low interest.
• Ideal for short-term borrowing needs.

4. Peer-to-Peer (P2P) Lending

• Online lending platforms allow borrowers to access loans with negotiable interest rates.
• Easier approval process compared to banks.

5. Employer Salary Advance

• Some companies provide salary advances or employee loans at zero or minimal interest.
• Reduces dependency on high-interest credit.

Conclusion

Applying for a credit card loan with a low CIBIL score is possible, but it comes with certain risks. Banks may approve the loan based on existing credit relationships, stable income, or secured credit cards. However, high-interest rates and credit utilization can negatively impact your financial health if not managed properly.

Before applying, compare loan offers, ensure timely repayments, and explore alternative loan options for a more financially sound decision. Being responsible with your credit can help you improve your CIBIL score over time and access better financial opportunities in the future.

The post How to Apply for a Credit Card Loan with a Low CIBIL Score appeared first on In Fintech.

Introduction

For individuals with a low CIBIL score, securing traditional loans from banks and financial institutions can be challenging. Many such borrowers turn to payday loans, a type of short-term loan designed to offer quick cash solutions. Understanding Payday Loans and Their Risks for Low CIBIL Score  While these loans provide instant liquidity, they come with significant risks, including high-interest rates and potential debt traps.

This article will provide an in-depth understanding of payday loans, their advantages, risks, alternatives, and best practices for low CIBIL score holders looking for financial assistance.

What Are Payday Loans?

Payday loans are short-term, high-interest loans meant to be repaid by the borrower’s next paycheck. These loans are typically used for urgent financial needs, such as medical emergencies, overdue bills, or unexpected expenses.

Key Features of Payday Loans:

• Short-Term Duration: Usually must be repaid within two to four weeks.
• Small Loan Amounts: Typically range from ₹5,000 to ₹50,000, depending on the lender.
• High Interest Rates: Can range from 24% to 60% APR or more, leading to high repayment amounts.
• Minimal Documentation: No stringent credit checks; usually requires ID proof, income proof, and bank details.
• Instant Disbursal: Funds are transferred within 24 hours, often within minutes.

Why Do Low CIBIL Score Holders Opt for Payday Loans?

A low CIBIL score (usually below 650) makes it difficult for borrowers to get approval from banks for personal loans. Payday loans become an attractive option because:

• No Credit Score Requirement: Lenders approve applications based on income rather than CIBIL scores.
• Quick Cash Availability: Emergency funds can be accessed instantly.
• No Need for Collateral: Unlike secured loans, payday loans don’t require assets as security.
• Minimal Paperwork: Simple application process without excessive documentation.

Risks of Payday Loans for Low CIBIL Score Borrowers

While payday loans offer easy access to funds, they come with several financial risks that can worsen a borrower’s situation.

1. Extremely High Interest Rates

Payday loans often have interest rates as high as 24% to 60% per annum, significantly increasing the repayment burden. A borrower may end up paying double or triple the borrowed amount over time.

2. Short Repayment Period

Since payday loans require repayment within two to four weeks, borrowers with financial difficulties may struggle to repay on time, leading to additional charges.

3. Debt Trap Cycle

Many borrowers are unable to repay the full amount and opt for loan rollovers or take additional payday loans to cover previous ones, leading to an endless debt cycle.

4. Hidden Fees and Penalties

Late repayments attract penalty charges, processing fees, and renewal fees, which significantly increase the loan cost.

5. No Improvement in CIBIL Score

Unlike secured or long-term loans, payday lenders do not report timely repayments to credit bureaus, meaning payday loans won’t improve your CIBIL score.

6. Aggressive Debt Collection Practices

Some payday lenders employ harsh collection tactics, including frequent calls, emails, or even threats, causing stress and financial strain.

Alternatives to Payday Loans

If you have a low CIBIL score and need urgent funds, consider safer alternatives instead of payday loans:

1. Personal Loans from NBFCs

• Many NBFCs (Non-Banking Financial Companies) offer loans to low CIBIL score holders at reasonable interest rates.
• Loan tenure is more flexible, ranging from 6 months to 5 years.
• Helps in improving CIBIL score upon timely repayment.

2. Loan Against Collateral

• Gold Loan: Borrow against gold ornaments with lower interest rates.
• Loan Against Fixed Deposit: Banks offer loans up to 90% of FD value.
• Loan Against Property: Can be availed for a longer tenure at lower interest rates.

3. Borrowing from Credit Unions or Cooperative Banks

• Cooperative banks provide small personal loans at lower interest rates.
• More flexible repayment options compared to payday lenders.

4. Employer Salary Advance

• Many employers offer salary advances or short-term employee loans.
• Zero or minimal interest rates compared to payday loans.

5. Peer-to-Peer (P2P) Lending Platforms

• Online platforms connect borrowers with investors willing to lend at negotiable interest rates.
• Easier eligibility criteria than banks.

6. Emergency Credit Lines

• Some fintech platforms provide small credit lines that work like payday loans but with lower interest rates.
• Borrow only the required amount and repay in installments.

Best Practices to Avoid Payday Loan Traps

If you must take a payday loan, follow these best practices to avoid falling into financial distress:

1. Borrow Only What You Can Repay

Avoid over-borrowing; calculate your repayment ability before taking the loan.

2. Compare Lenders for Lower Interest Rates

Not all payday lenders charge the same interest. Look for licensed lenders with transparent fees.

3. Read the Loan Agreement Carefully

Check for hidden charges, late payment penalties, and processing fees before signing the agreement.

4. Prioritize Early Repayment

If possible, repay the loan before the due date to avoid accumulating interest and fees.

5. Avoid Loan Rollovers

Rolling over payday loans leads to deeper debt. If you’re struggling, consider negotiating a repayment plan instead.

6. Explore Government or NGO Assistance

Certain government schemes and NGOs provide financial assistance to individuals in crisis without high-interest loans.

Conclusion

Payday loans are a double-edged sword for low CIBIL score holders—they offer quick financial relief but come with sky-high interest rates and risks. Before opting for a payday loan, explore safer alternatives like NBFC personal loans, collateral-based loans, or employer salary advances.

If payday loans are the only option, ensure timely repayment, avoid rollovers, and compare multiple lenders to find the best terms. Smart financial planning and responsible borrowing habits will help low CIBIL score holders avoid debt traps and gradually improve their financial standing.

The post Understanding Payday Loans and Their Risks for Low CIBIL Score Holders appeared first on In Fintech.

A low CIBIL score can make it challenging to secure a loan from traditional banks, as it signals a higher risk to lenders. However, individuals with poor credit scores still have viable options, one of the most effective being a loan against collateral. This type of secured loan provides access to funds by pledging an asset as security,  reducing the lender’s risk and increasing approval chances for borrowers.

This article explores how loan against collateral works, the benefits, eligibility criteria, and the different types of collateral that can be used to secure a loan for applicants with a low CIBIL score.

Understanding Loan Against Collateral

A loan against collateral, also known as a secured loan, is a loan that requires the borrower to pledge an asset as security. The lender holds the asset as collateral until the loan is repaid in full. If the borrower defaults, the lender has the right to liquidate the collateral to recover the loan amount.

Since the loan is backed by an asset, financial institutions are more willing to approve it, even for applicants with poor credit scores.

Types of Collateral Accepted for Secured Loans

Lenders accept various forms of collateral when issuing secured loans. Some of the most common include:

1. Gold Loan

A gold loan is a secured loan where borrowers pledge their gold ornaments or coins in exchange for funds. Many financial institutions, including banks and NBFCs, offer gold loans with minimal documentation and quick disbursals.

Key Benefits:

• Loan amounts up to 75% of the gold’s market value.
• Lower interest rates compared to personal loans.
• Instant approval and disbursal, often within a few hours.
• No impact of low CIBIL scores on loan approval.

2. Loan Against Property (LAP)

A Loan Against Property (LAP) allows borrowers to pledge residential, commercial, or industrial property as collateral. The loan amount depends on the market value of the property and the lender’s terms.

Key Benefits:

• High loan amounts, up to 60-70% of the property’s market value.
• Lower interest rates compared to unsecured loans.
• Long repayment tenure of up to 15-20 years.
• Available for both salaried and self-employed individuals.

3. Loan Against Fixed Deposits (FD)

Banks allow borrowers to take a loan against their Fixed Deposits (FDs), using them as collateral.

Key Benefits:

• Interest rates are 1-2% higher than the FD rate.
• No processing fees in most cases.
• Up to 90% of the FD value can be availed as a loan.
• The borrower continues to earn interest on the FD while using the loan amount.

4. Loan Against Insurance Policy

Some lenders offer loans against life insurance policies where the policyholder can borrow against the surrender value of their policy.

Key Benefits:

• Lower interest rates.
• No additional collateral required apart from the policy.
• Borrowers continue to enjoy policy benefits while using the loan.

5. Loan Against Mutual Funds and Shares

Borrowers can also pledge mutual fund units or shares to secure a loan. The loan amount depends on the Net Asset Value (NAV) of the mutual fund or the value of shares.

Key Benefits:

• Quick approval and processing.
• Loan amount up to 50-60% of the investment value.
• The borrower retains ownership of the investments while availing funds.

How Loan Against Collateral Helps Low CIBIL Score Applicants

1. Higher Approval Chances

Since secured loans involve collateral, lenders are less concerned about the borrower’s credit score. This increases approval chances for individuals with a low CIBIL score.

2. Lower Interest Rates

Compared to unsecured loans, secured loans come with lower interest rates because the risk to the lender is minimized.

3. Flexible Loan Amounts

The loan amount depends on the value of the pledged asset, allowing borrowers to secure higher amounts based on their financial needs.

4. Longer Repayment Tenure

Loans against collateral typically offer longer repayment tenures, making EMIs more affordable for borrowers.

5. Helps in Credit Score Improvement

Timely repayment of a secured loan can gradually improve the borrower’s credit score, making them eligible for better loan products in the future.

Eligibility Criteria for Loan Against Collateral

While eligibility requirements may vary by lender, the general criteria include:

• The borrower must be at least 21 years old.
• A stable source of income is preferred for repayment assurance.
• The collateral must be free from legal disputes.
• The borrower must provide ownership proof of the asset.
• Some lenders may have a minimum loan-to-value (LTV) ratio requirement.

Documents Required for Loan Against Collateral

• Identity Proof (Aadhaar card, PAN card, Passport, Voter ID)
• Address Proof (Utility bill, Rental agreement, Driving license)
• Income Proof (Salary slips, Bank statements, IT returns for self-employed)
• Collateral Documents (Property papers, FD receipts, Insurance policy, Gold valuation certificate, etc.)
• Photographs (Passport-sized photos as required by the lender)

How to Apply for a Loan Against Collateral

Step 1: Choose a Lender

Compare interest rates, LTV ratio, and loan terms from various banks, NBFCs, and online lenders.

Step 2: Submit the Application

Fill out the loan application form online or visit the lender’s branch.

Step 3: Provide Necessary Documents

Submit the required KYC and collateral documents for verification.

Step 4: Asset Evaluation and Loan Approval

The lender evaluates the collateral’s market value before approving the loan amount.

Step 5: Loan Disbursal

Once approved, the loan amount is credited to the borrower’s bank account within a few days.

Risks and Precautions

While a loan against collateral is a great solution, borrowers should be mindful of the following risks:

1. Risk of Losing the Asset

If the borrower fails to repay the loan, the lender has the legal right to seize and sell the asset to recover dues.

2. High Processing Fees and Charges

Some lenders charge processing fees, valuation fees, and prepayment penalties that can increase the overall loan cost.

3. Loan Amount Restrictions

The approved loan amount depends on the asset’s market value, which may be lower than expected.

Conclusion

For individuals with a low CIBIL score, a loan against collateral is a viable financial solution, offering higher approval chances, lower interest rates, and flexible repayment options. By pledging assets such as gold, property, FDs, insurance policies, or investments, borrowers can secure funds even when traditional lenders reject their applications.

However, borrowers should carefully assess their repayment ability to avoid losing the pledged asset. Comparing loan terms from multiple lenders and understanding the risks involved can help in making an informed borrowing decision.

The post Loan Against Collateral: A Solution for Low CIBIL Score Applicants appeared first on In Fintech.

A low CIBIL score can be a major hurdle when applying for a loan, as traditional banks consider it a sign of high risk. However, Non-Banking Financial Companies (NBFCs) provide a ray of hope for individuals with poor credit scores by offering flexible lending options. How NBFCs Help in Getting Loans with Low CIBIL Scores rather than just their credit score, making loans accessible to those who struggle with traditional lending criteria.

This article explores how NBFCs help borrowers with low CIBIL scores, the types of loans they offer, eligibility criteria, and how to improve your chances of securing a loan.

Understanding NBFCs and Their Role in Lending

NBFCs (Non-Banking Financial Companies) are financial institutions that provide banking services like loans and credit facilities but do not hold banking licenses. Unlike traditional banks, NBFCs are more flexible in their loan approval process and cater to a wider range of borrowers, including those with low credit scores.

Key Differences Between NBFCs and Banks

• Flexible Eligibility Criteria: NBFCs consider factors beyond just credit scores, such as income stability and employment history.
• Faster Loan Approval: NBFCs have a quicker loan processing time, often providing instant or same-day approvals.
• Higher Interest Rates: Due to the higher risk, NBFCs charge slightly higher interest rates compared to banks.
• Lower Loan Amounts: Depending on the borrower’s profile, NBFCs may offer a lower loan amount than traditional banks.

How NBFCs Help Borrowers with Low CIBIL Scores

NBFCs offer various financial solutions for individuals struggling with poor credit scores. Here’s how they help:

1. Flexible Credit Evaluation

Unlike banks that primarily focus on CIBIL scores, NBFCs assess borrowers based on multiple factors, such as:

• Income stability
• Employment type (salaried/self-employed)
• Business revenue (for business loans)
• Loan repayment history over the past six months

This allows individuals with low credit scores to qualify for loans based on their current financial standing.

2. Offering Secured Loans

For borrowers with a low CIBIL score, NBFCs provide secured loans, where collateral is used to minimize risk. Some common secured loan options include:

• Gold Loans: Borrowers pledge gold as security to get a loan.
• Loan Against Property (LAP): Individuals can use real estate as collateral.
• Fixed Deposit-backed Loans: Customers can avail loans against their FD accounts.
• Loan Against Insurance Policies: Some NBFCs allow borrowing against life insurance policies.

Since secured loans reduce the lender’s risk, borrowers with low credit scores have a higher chance of approval.

3. Providing Personal Loans with Higher Interest Rates

NBFCs offer personal loans even to those with poor credit scores, though at slightly higher interest rates. The loan amount and terms depend on:

• Monthly income
• Employment type
• Repayment capacity
• Existing debts

These personal loans are ideal for emergencies, medical expenses, or debt consolidation.

4. Customized Loan Products for Low CIBIL Borrowers

Some NBFCs design special loan products for borrowers with low credit scores. These loans come with:

• A lower loan amount initially, with a chance to increase later.
• Shorter repayment periods.
• Additional charges or fees to compensate for the credit risk.

Borrowers who repay these loans on time can gradually improve their credit scores and become eligible for better financial products.

5. Business Loans for Entrepreneurs with Low Credit Scores

Entrepreneurs with poor credit scores can turn to NBFCs for business loans. These lenders evaluate the business’s financial health, revenue trends, and market potential rather than just the borrower’s credit history.

NBFC business loans come with:

• Minimal documentation.
• Quick disbursal times.
• Flexible repayment terms.
• Options for both secured and unsecured business loans.

6. Instant Digital Loan Approvals

Many NBFCs have adopted digital lending platforms, allowing borrowers to apply online and receive instant loan approvals. These platforms use advanced algorithms to assess eligibility based on banking transaction history, spending patterns, and other financial behaviors rather than just credit scores.

Some popular NBFC digital lending platforms include MoneyTap, KreditBee, and EarlySalary.

Eligibility Criteria for Loans from NBFCs

While NBFCs are more lenient than banks, they still have basic eligibility requirements. Common criteria include:

• Minimum age: 21-60 years
• Minimum income: Varies by lender but typically ₹15,000-₹25,000 per month
• Employment status: Salaried or self-employed
• Loan purpose: Personal, business, home, education, or vehicle loan

For secured loans, borrowers need to provide collateral such as gold, property, or fixed deposits.

Documents Required for NBFC Loans

Most NBFCs require the following documents for loan processing:

• Identity Proof: Aadhaar card, PAN card, or passport
• Address Proof: Utility bills, rental agreement, or voter ID
• Income Proof: Salary slips, bank statements, or income tax returns
• Employment Proof: Offer letter or business registration documents
• Collateral Documents: If applying for a secured loan

How to Improve Your Loan Approval Chances with NBFCs

Even if you have a low CIBIL score, taking the following steps can improve your chances of loan approval:

1. Apply for a Lower Loan Amount

Requesting a smaller loan amount increases the chances of approval as it reduces the lender’s risk.

2. Show a Stable Income and Employment History

A steady income reassures NBFCs that you can repay the loan. Submitting recent salary slips, business invoices, or bank statements can strengthen your application.

3. Opt for a Secured Loan

Providing collateral significantly increases loan approval chances since it lowers the lender’s risk.

4. Get a Co-Borrower or Guarantor

Applying with a co-borrower who has a strong credit history can help in securing a loan at better terms.

5. Improve Your CIBIL Score Before Applying

If your loan requirement is not urgent, work on improving your credit score by:

• Paying off existing debts on time.
• Reducing your credit utilization ratio.
• Avoiding multiple loan inquiries in a short period.

Risks and Things to Watch Out For

While NBFCs provide easier loan access, borrowers should be mindful of the following:

1. Higher Interest Rates

NBFC loans, especially unsecured ones, come with higher interest rates compared to banks. Always compare different lenders before choosing one.

2. Hidden Charges and Fees

Check for processing fees, late payment penalties, and prepayment charges to avoid unexpected costs.

3. Loan Scams

Some fraudulent lenders take advantage of borrowers with low credit scores. Always verify the lender’s RBI registration and customer reviews before applying.

Conclusion

NBFCs have emerged as a reliable alternative for borrowers with low CIBIL scores, offering loans with flexible eligibility criteria, faster approvals, and digital lending options. Whether you need a personal loan, business loan, or secured loan, NBFCs provide multiple solutions to meet financial needs.

However, borrowers must carefully evaluate interest rates, fees, and repayment terms before taking a loan. By maintaining a stable income, opting for secured loans, or applying with a co-applicant, borrowers can improve their approval chances and work toward better financial health in the long run.

The post How NBFCs Help in Getting Loans with Low CIBIL Scores appeared first on In Fintech.