Whenever you apply for a loan, your credit score and credit history is reviewed by the lender. What they look for is a high score and a financial history that doesn't have any instance of loan default, late payments, or a huge debt. However, young professionals often get worried when they check their CIBIL report and realize that it's blank and there is no credit score either. This usually happens when they haven't taken any loan before or used a credit card.
Many people think that the lack of financial history can lower the chances of new loans. Some even associate the absence of credit history with a low credit score. However, is it really true? Let’s find out.
If you check your free CIBIL score and find it absent, then it shouldn't scare you. After all, you can't have a credit score when you don't have a credit history. However, we all start from zero and if the banks didn't approve loans for individuals with no credit history, then no one would ever get a loan.
Although it's true that the banks prefer to approve loans for the individuals who have a good credit score and financial history as that allows them to access the creditworthiness of the person accurately, they may approve loans even when the credit experience is non-existent. This is because they understand that young borrowers may not necessarily have experience with credit cards and loans.
Obtaining a personal loan when you don't have any experience with credit can be difficult. However, there are a number of things that you can do to increase your odds, which are:
The easiest ways to create credit history is to get a credit card. This is because banks are more comfortable in issuing credit cards than loans as these don't come with a huge risk. They don't necessarily have to approve a high credit limit initially as well. However, even with lower credit limit, not only you can create a credit history, but you can also build a good score over just a few months by using the card responsibly. You can even check your free CIBIL score once every year or pay for more reports.
Personal loans are usually unsecured loans, which means that you don't have to offer collateral like in home loans. However, if you are facing trouble getting a personal loan due to the lack of CIBIL, then you can offer collateral on your own to help with the case. There are various assets that you can offer including your house, car, stocks, gold, etc.
If traditional banks are giving you a hard time with your personal loan needs, then you can consider the options available on the peer-to-peer (P2P) platforms which offer instant online loans. In fact, many offer personal loans without CIBIL check.
A P2P platform is an online platform which connects private investors or lenders to the borrowers. To get a loan, all you have to do is create an account and send an application with the loan amount. Although you have to provide a few documents including salary proof, ID proof etc., you can submit these online in a digital format which is quite convenient. Once your documents are verified, you can get the loan within 1-2 days.
If you are unable to get a loan on your own, then you can try to get another person such as your spouse to apply with you in the form of joint loan. If they have a good credit score, then the bank may approve the application considering their profile. However, bear in mind that the responsibility of the loan's repayment lies with both applicants i.e. you and them. If either of the co-borrowers fails to pay the EMIs, then it affects the credit rating of the other co-applicant as well.
Try to use the above information for your situation but also work to build a credit history as well as that will surely help you in the long-term. Good luck!