No matter how prepared you may seem in life or sometimes due to mismanagement of the finances, there may be times when a financial crisis hits you and you find yourself in the need of immediate cash. Taking loans should always be the last resort, but it’s all about the situation that time.
At such difficult times, your friends or family come to your rescue with soft loans.The other option is an easy and hassles free loan from a lender who would ideally give you an immediate approval of your application and disburse the loan as soon as possible.
It is indeed easy to get a personal loan these days, but in order to get a fast approval on a personal loan you need to have a good CIBIL score. But what if you do not have a score at all? Is the option of accessing a loan closed for you? Definitely not! There are several solutions, where one can get no credit check loans. But first, we shall learn what credit history is?
What is credit history and why is it important?
A credit history is a report compiled with information on how you manage your debts with various banks. A credit report has information such as your payment patterns, your existing loans, Your loan enquiries and so on. The credit bureaus and credit reporting agencies are the one who maintain you credit score on the basis of information supplied to them by various banks.
In India majorly CIBIL is used as a prime credit bureau by Indian banks to assess your creditworthiness. Nowadays in India, many employers also look at the credit score of the employee before handing over the appointment letter. Internationally, even before letting you the house on Rent, landlord asks for a credit score. In India, the use of credit score is quite limited as of now, but going forward the usage will surely increase.
Read on to know what you can do if you wish to apply for no credit check loans or loans without a CIBIL score and build a credit history and good credit score.
Options for no credit check loans
First up, you need to know the problem at hand. A traditional top of the line lender or Bank is unlikely to give you a personal loan without CIBIL score. Though it depends on many other factors like your income, your employer brand image, your job stability, your education etc. but Credit score is also one of the important consideration. And the process of loan disbursement may take a bit long which may not answer your immediate requirement
In India, different channels are opening up to fund different emergencies. Many NBFC has come up to fund the medical emergencies and provide loans for medical treatment, which you can repay in easy instalments. Some hospitals provide subvention kind of facility with these loans, which makes the loans kind of zero interest loans for the borrower.
The other option is to consider a peer to peer (P2P) lending platform. The advantage of such a platform is that you can get in touch with a willing lender directly. Besides, such platforms consider atypical credit assessment factors such as the future prospects in your job and social media footprint. These factors then enhance the chances of your getting a loan at competitive personal loan interest rates. Read a detailed post on Peer to Peer Lending here.
When approaching for such options, you will be asked for payment proofs like monthly electricity bill, mobile phone bills, and other documents just to evaluate your payment patterns. The lenders may get you answer some Psychometric questionnaire too, to evaluate your creditworthiness.
While no credit check loans may get fast approval, but approaching for such loans has its own disadvantages as well. These loans come at a very high-Interest cost.
If you have a good credit history, you have the power to negotiate on terms of interest rates, tenure, and processing fees.
But with no or low credit score, you are an easy prey to these lenders and they can push you to any extent and you have no option but to surrender if you are in dire need of cash.
So it’s always wise to be doubly prepared. Besides following the basics of financial planning like maintaining an emergency fund, having adequate insurance coverage, keeping liquid investments in the portfolio, you should also work on building and maintaining a good credit score. Below are some of the ways you can build your credit score
Consider a secured credit card
If you are accessing a personal loan without any pervious credit history, because you were a student earlier, your best bet is to apply for a secured credit before making a loan application. A secured credit card is offered by the top lenders in India against a fixed deposit. The card limit is capped at a certain percentage of the fixed deposit (75-80%). A secured card offers several advantages for an individual applying for a personal loan without CIBIL score.
Firstly, by taking this card you establish a credit record. Secondly, there are little chances of overspending on the card as you know that your fixed deposit will be liquidated in case of non-payment of dues. Finally, a secured credit card gives you the opportunity to build a good credit record a thus get a good score over time.
Get a supplementary credit card
If you do not have the option of taking a secured credit card against a fixed deposit, you can request a family member (ideally a financially responsible individual with a good CIBIL score) to add you as an authorised user of an existing card that he or she uses.
As soon as the primary cardholder authorises you as an additional user you get your own credit card that also establishes your credit history as all the information about the card usage is reported to credit bureaus such as CIBIL.
However do bear in mind, that even though you are supplementary credit card owner, all the details of your usage will show up on the statement of the primary cardholder. What’s more is that, your usage pattern will impact the score of the primary cardholder.
Thus if you turn out to be reckless with your credit usage, the primary cardholder will not only be responsible for your card repayments but may also stand to lose CIBIL points if you land him in a debt trap. The opposite is also true. If the primary holder turns to have bad financial habits, then your score will also be impacted.
You must therefore be prudent and judicious with the usage of a supplementary credit card. Besides reckless usage of credit at the beginning of your credit record will not be flattering for your CIBIL score.
Try getting a small consumer loan
If you do not want to consider the credit card option, try getting a consumer loan to purchase a mobile phone or any electric goods. It is not otherwise a wise thing, but just to build the initial score you may try this once or twice. Don’t make it a habit.
In this type of loan the lender sanctions loan to those people also who do not have a cibil score. You can go to any electronics shop and opt for such loan which will not only help you build a great credit score but also will help you elevate your score if you make payments on time . This is one of the best options to consider if you are trying to build your score from scratch.
Thus, in conclusion, it is fair to say that a good Credit history is an advantage when you are trying to get a loan at competitive interest rates. However, as stated earlier there are ways to get no credit check loans and it is not impossible to get a loan without CIBIL score, though you may have to put in some additional efforts.
“Are loans available to people with no credit history” is a guest post written by Team Credit sudhaar.
Manikaran Singal is the founder and Chief financial planner at Good Moneying Financial Solutions. He is a CERTIFIED FINANCIAL PLANNER CM and SEBI registered Investment adviser (Regd no. INA 100001620). He’s having 20+ years of experience in financial services space.
