Getting loans unlike before does not require a guarantor or knowing the branch manager. There are clear cut guidelines laid down for the applicant in case he/she is looking for a loan. Be it any loan that you apply for or any lender that you choose to approach you will have to meet the eligibility criteria for the loan to be sanctioned. Once such condition that the applicant needs to meet is having a good credit rating; this is the first step. If you do not have a good credit score it is unlikely that your loan application will go beyond the first step which is the credit check. However this does not mean you cannot still borrow. Read on to find out more.
So one might wonder why is the credit score important for getting a loan sanctioned. When you apply for an education loan or a home loan, the lender extends it with the assumption that the borrower will repay the dues in a timely and disciplined manner. For this the lender needs to be sure of the financial capacity and also the intent of the borrower to do so. The financial capacity can be judged by looking at the debt to income ratio, monthly expenses, current loans etc; the intent can be ascertained by looking at the credit report of the applicant. Based on the credit history of the applicant the lender will be able to ascertain if the borrower is likely to repay on time and this will form the basis for the loan application being rejected or accepted.
Often it may seem that a low score is the end of the road for your borrowing dreams, however this need not be true anymore. Though a good score will always come in handy when someone is seeking a loan but now getting a loan for low CIBIL score is not restricted only to approaching lenders who offer them at exorbitant rates; there are a few other options and we explore one of them here.
Those of you are seeking a loan despite a low score can borrow using the lending platform that is known as Peer-to-peer (P2P) lending. As per the RBI P2P sites are defined as “a form of crowd-funding used to raise loans which are paid back with interest. It can be defined as the use of an online platform that matches peer lenders with borrowers in order to provide unsecured loans”. These websites offer small personal loans up to Rs 5 lakhs for a duration ranging from 12 to 24 months. There is no collateral required.
Here it is important to mention that the applicant’s credit profile will still be considered before sanctioning the loan application. The rates can be negotiated depending on the credit profile. The borrowers are categorized under various risk categories depending on their credit profile. Well the question that comes to mind is, if here also the credit history of the applicant is important, then how are these lending platforms different from the usual channels. The difference lies in the aspect that the credit history is given only 50% importance, other factors are also considered for the decision making process. Other factors that are considered include assessing the banking behavior of the applicant, the social behavior assessment is done by looking at the social media platforms like Facebook and LinkedIn, current payment pattern along with monthly outflow, job stability, family dynamics etc are also considered.
Thus for someone with a low score these websites could offer a viable alternative to the usual banking channel. Another aspect that makes these websites popular especially among the young is easy and quick disbursement and also the competitive rate of interest. Some of the P2P lending websites in India are Faircent, PaisaDukaan, i-Lend, Cashkumar, Lendbox etc. Till September 2017 these websites were not covered under the ambit of RBI. However post that they have been registered as NBFCs and RBI updates the list of NBFCs registered as P2P lenders every quarter.