When you apply for a small business loan or a personal loan, one of the determinant factors of loan approval is your CIBIL score. As you all probably know, a business with a good CIBIL score has a high chance of getting its loan application approved. Not all businesses have a good credit rating. If you are such a business, you would be looking to obtain a loan without CIBIL score.
Loan without CIBIL score
Although all lenders check your CIBIL score before approving the loan, there are lenders that will approve your loan based on other factors. Let us have a look at the factors that will allow you to apply for a loan without credit score:
- Collateral loans
Collateral is the security offered against the loan. When you offer collateral against your loan application, there are more chances of getting your loan approved. This is because collateral acts as a security against the loan which can offset any losses for the lender in case the borrower defaults. This will help you get an instant loan without CIBIL score.
While applying for loans you can choose to get a guarantor for the loan application. A guarantor is someone who agrees to pay off your debt if you default on your loan payments. A guarantor with a good CIBIL score can help you get a loan without a CIBIL score.
Family members, including parents or siblings, can be guarantors for personal loans. You have to make sure the guarantor has a good CIBIL score before adding him as the guarantor on your loan application.
- Loan amount
As you probably know, if you apply for small loan amounts it is relatively easy to get a loan sanctioned. Therefore, applying for small loans will help you get instant business loan or even a personal loan without CIBIL score.
- Income proof
A valid income proof can help you get an instant loan without CIBIL score. Tax returns, TDS certifications, profit and loss statement are valid income proof that can guarantee a loan without CIBIL score. However, the documents submitted must prove that you have a stable source of income which will help you pay the loan on time.
- NA or NH on credit report
Sometimes you might be applying for a loan for the very first time. In this case, you will not have a credit history which means your credit report will indicate NA (Not Available) or NH (No History). You can easily explain this inactivity to the lender to get a loan approved. However, the chances are that you will be charged a high interest rate.
- Joint loan
You can choose to apply for a loan with a co-applicant. Even though your CIBIL scores are low, your loan can get approved if the co-applicant’s CIBIL scores are good. The lender will check the co-applicant’s income and his/her ability to repay the loan amount.
Also read: What is the difference between a credit score and a CIBIL score?
Alternate fundraising options
Here are some alternative methods of fundraising to choose if you have low CIBIL scores:
- Check for online business loan platforms: There are many new age fintech companies offering business loans at attractive interest rates. They tend to have relaxed eligibility criteria and a quick and easy loan application and approval process.
- Opt for loans from NBFCs and MFIs: Business loans are taken to fund a business operation like starting a new project or purchasing new machinery. While most businesses approach banks for business loans, there are other financial institutions like NBFCS and MFIs that offer unsecured loans at low interest rates. Additionally, loans from NBFCs and MFIs have quick approval and disbursement processes along with competent interest rates.
- Find government schemes offering loans: Government has introduced many funding schemes for businesses to boost the availability of credit. Schemes including MUDRA, Stand Up India, CGTMSE, etc., seek to fulfil the credit requirements of MSMEs by giving them easy and affordable credit facilities. Eligibility for any of these schemes means loans at very low interest rates or other government loan subsidies.