While applying for any loan or other credit facilities, we do need to provide the lender with information regarding our credit history and CIBIL score. Getting a personal loan is much easier compared to other loan facilities as these are unsecured and require minimal paperwork. With the advent of digital lending platforms lenders are offering loans only based on credit scores of the borrowers.

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So, if you are applying for a personal loan it’s important to understand the role of CIBIL score or credit score in availing a loan.

What is a personal loan?

A personal loan is an unsecured loan option that provides a short repayment term and generally offers a much lower amount than other loans. One doesn't need to submit any collateral as it's an unsecured loan. However, the interest rate for personal loans is higher compared to secured loans. It's a good option for those in urgent need of funds as a personal loan can be availed in a short duration compared to other loans.

Why is your credit score important for getting a personal loan?

While lenders don't ask for collateral, they do conduct a credit check before accepting a personal loan application. However, with a low or no CIBIL score, it's difficult to assess your creditworthiness and the bank might withhold the application. Furthermore, an applicant with a low credit score may lose the benefits like low interest rates, higher loan amount and extended periods for repayment.

How to get a personal loan with no credit history?

If one doesn't have a credit history then they need to consider the following tips to avail a personal loan:

Applying for a collateral-based loan: While personal loans are unsecured and don't require any collateral, it's generally in the case of an applicant with a high CIBIL score. In case one doesn't have a credit history then they can opt for a collateral-based personal loan instead of being rejected.

Prove your creditworthiness: An individual with a steady and reliable source of income can easily get a personal loan by proving their creditworthiness. They can display their salary statement or payslips to prove that they earn the required amount that could be used to repay the loan.

Match the eligibility criteria of the lender: Different lenders have distinct eligibility criteria for a personal loan. Therefore, those who don't have a credit history can meet their personal loan eligibility criteria to get a higher chance of acquiring a personal loan.

‘No history’ credit report: Request your lender to mark your credit report with remarks, such as History not Available (NA) and No History (NH). It affirms that you haven't availed any credit facility in the last 36 months. Thereafter, you can discuss the reasons with the lender and convince them to give you the loan.