Are your loan applicants constantly getting rejected due to “insufficient credit score” by Experian Credit score? Well, there are still ways to get a loan depending on which bank you choose and how well you negotiate with the bank representative.

Experian India

Credit scores are only one of the factors considered by banks and lenders before approving a loan. Granted, that it is one of the more important factors, but the way you pitch your loan requirement to the bank could be the difference between having a loan approved or rejected, despite a low credit score.

When you approach the bank, you need to have a well-thought-out idea of why you need the loan, what you intend to do with it, and how the loan would enable you to increase your level of income to such an extent that you are able to repay the loan on terms acceptable to you and the bank. Convincing the bank representative of why you need a loan shouldn’t be that difficult, if you’re smart. If you don’t have a proper plan as to how you intend on repaying your loan, maybe you’re better off not taking the loan in the first place.

A well thought out plan should include the following:

  • Your reason for taking the loan. If you want a loan to travel or go on holiday, and you have a bad credit score, don’t even bother approaching the bank because you going on holiday is not going to generate any money for the bank. If you want a loan to set up a business that you believe will succeed and your customers will be able to pay for the product or service, the bank may consider you to be a viable candidate.
  • Your spending plan. While this is entirely your business, telling your bank where you intend to spend and how much you intend to spend and for what purpose, could instil a sense of confidence in the bank that you have your ducks in a row. Again, spending here shouldn’t be on a dead investment like a fancy new car or a high performance stereo system, it should be spending in the form of investments in assets that can generate income, or can help you generate income.
  • Your business plan. The product or service you wish to produce and sell to the masses must be clearly thought out and all contingencies should be anticipated. The business plan should be constructed in a future where the bank has approved your loan application, and you must be able to communicate the projected growth or planned rollout of your product or service in the market.
  • You repayment plan. After the bank approves your loan and you’re established – how long will it take for you to realize a profit on your venture? You can negotiate the first repayment and when the EMIs start at this stage, by communicating to the bank that the money taken as a loan can only start generating an income after “x” number of months / weeks in your particular case.
  • Contingencies. Any plan is only as strong as the preparation put into it. Preparation is incredibly important, but excellent preparation is only half the battle won. You must plan for everything that could potentially go wrong at every stage of your venture, and plan a countermeasure to deal with it. Communicate this with the bank and they will be confident that you are deserving of the loan as you have every intention of paying it back, and won’t use contingencies as excuses to delay payments.

Most of the above points are for loans taken to start businesses for the selling of goods or the provision of services, but they can be altered depending on your particular case. Just remember that the bank will undoubtedly approve your loan if you’re able to convince them that you can pay them back. A Experian Credit score, at the end of the day, is nothing more than a confirmation that you have performed well with debt in the past, and that you honour your repayments. If you can convince the bank of this without a Experian Credit score, your loan is as good as approved.

Even so, if you aren’t able to (or don’t want to) spend so much time in the branch manager’s office trying to convince him / her to give you money, you can always apply at these banks who accept a score below 750 / 800 for various types of loans:

  1. IndiaBulls offers home loans of up to Rs.50,00,000 to applicants with credit scores as low as 680 at 9.45% for a 20 year tenure.
  2. DHFL offers home loans of up to Rs.50,00,000 to applicants with credit scores as low as 680 at 9.50% for a 20 year tenure.
  3. HDFC bank offers home loans of up to Rs.50,00,000 to applicants with credit scores as low as 700 at 9.45% for a 20 year tenure.
  4. ICICI bank offers home loans of up to Rs.50,00,000 to applicants with credit scores as low as 700 at 9.45% for a 20 year tenure.
  5. IndusInd Bank offers personal loans of up to Rs.5,00,000 to applicants with credit scores as low as 700 at 14.50% for a tenure of 5 years.
  6. HDFC Bank offers personal loans of up to Rs.5,00,000 to applicants with credit scores as low as 700 at 14.49% for a tenure of 5 years.
  7. ICICI Bank offers personal loans of up to Rs.5,00,000 to applicants with credit scores as low as 700 at 14.49% for a tenure of 5 years.
  8. Bajaj Finserve offers personal loans of up to Rs.5,00,000 to applicants with credit scores as low as 700 at 14.49% for a tenure of 5 years.
  9. Axis Bank offers auto loans of up to Rs.5,00,000 to applicants with credit scores as low as 725 at 11% for a tenure of 5 years.
  10. HDFC Bank offers auto loans of up to Rs.5,00,000 to applicants with credit scores as low as 725 at 9.65% for a tenure of 5 years.
  11. ICICI Bank offers auto loans of up to Rs.5,00,000 to applicants with credit scores as low as 725 at 10.75% for a tenure of 5 years.
  12. L&T Finance offers auto loans of up to Rs.5,00,000 to applicants with credit scores as low as 700 at an interest rate that the bank will communicate to you, for a tenure of 5 years.

It’s important to note that banks will hold the fact that you have a lower Experian Credit score against you, and try to get you to sign the papers for a higher interest rate than the one advertised. Negotiation can go a long way here, and you can secure the loan you want for the rate you want.

The banks could also use the fact that you have a low Experian Credit score to approve a smaller portion of the loan. For example, a person with a high Experian Credit score (say around 800) applying for a home loan could have up to 80% of the property value financed through a loan, whereas a person with a lower Experian Credit score (say around 650) could have only up to 50% of the property value financed through a loan.

Don’t apply for a loan at too many banks at the same time. Keep it at one or two, as banks can find out how many other banks you’ve contacted for a loan, and this makes them weary of lending to you.

Approach your bank first. The bank in which you have your salary account or savings bank account already likes you (probably) and will be in a better position to listen to you and understand your situation.

Try NBFCs. Non-banking financial companies usually approve loans where banks won’t. Some may have higher interest rates or stricter conditions, but if you’re confident in your ability to repay – this is a viable option. Steer clear of loan sharks, stick to the registered NBFCs. NBFCs usually don’t care about your credit score, they just care that they’ll get their money back eventually.

 

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