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While credit score is a 3-digit numeric expression that helps lenders assess the creditworthiness of the borrower, there are a lot of elements that come together to bring together the 3-digit number. A credit score which ranges between 300-900 is a report card of one’s financial standing, where any score above 750 is considered good, a score between 550 to 750 is average, and any score below 550 is a poor or bad credit score .While getting personal loans with good credit score is a cakewalk, one can only get personal loans with high interest for average credit score and in some cases for poor credit score.
Ways of getting personal loans for bad credit.
- Prove that you can afford the EMI’s: Right after the credit score, it is income that is considered by the lender. One of the ways of getting personal loans for bad credit is by proving that you are eligible and capable of the EMI payments. If you are able to convince the lender that you have a regular and stable job, the chances for approval are higher.{A50DBD9D-B391-49C3-AABC-08ED0996FD22}
- Apply with a co-signer or secure a guarantor: Personal loans for bad credit can also be achieved with the help of a co-signer or guarantor. Applying with the help of co-signer will make the lenders consider the co-signer’s credit score, thus improving your chances of approval. Similarly, securing a guarantor will increase the confidence of the lender that you will not default your loan payments.
- Pledge collateral: Another secure way of personal loans for bad credit is by pledging collateral. Collateral is just like a guarantor except it is an asset that is attached with the loan. On failure of payments, the lender has the right to sell the collateral and realise it to get back the loan amount.
- Ask for a lower personal loan amount: If you have a poor credit score, the chances of approval for any kind of loan is less. However, personal loans for bad credit can be possible if you ask for a lower personal loan amount. This will further reduce the risk of borrower default as the lender has to give a lesser amount.
- Correct the mistakes on the credit report, if any: A lot of times, errors and mistakes on the credit report can lead to a poor credit score, thus affecting credit possibilities. Check your free credit report online once a year to see if there are any errors or mistakes that you must report.
The above-mentioned measures can help in getting personal loans for bad credit. However, the best and recommended way is to improve your credit score over time and then apply for credit.
DISCLAIMER
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
FAQS - FREQUENTLY ASKED QUESTIONS
Am I eligible for a loan if my credit is bad ?
You can get a Personal Loan even if your credit score is low. However, in such a situation, you may have to prove you have a secure job or can produce collateral against the loan to the lender. Usually, loans with low credit scores have higher interest rates and strict repayment conditions.
How do I get loan approval with bad credit ?
The following factors improve your chance of getting approval for a Personal Loan for bad credit:
· Apply for a small loan amount.
· Apply for a secured loan or provide collateral.
· Prepare a comprehensive loan application. Include the details of your income, employment history, and financial situation. A well-organised application highlighting your ability to repay the loan despite a bad credit history improves your chance of getting the loan approval.
· Apply with a co-applicant who has a good credit history.
Can I get a bad credit loan if I do not provide collateral ?
It is challenging to get low credit score Personal Loans without collateral. If you have no collateral to pledge, you can produce other proof to get the loan approved, such as proof of steady income and stable employment.
Can I use a bad credit loan to improve my credit score ?
Taking a bad credit loan may not necessarily improve your credit score. Bad credit loans are for individuals with poor credit scores. Hence, they often come with higher interest rates and less favourable terms.
What is the typical approval timeframe for a bad credit loan in India ?
The approval process for a low credit score loan usually takes a couple of days to a few weeks as it includes a more stringent approval process. The approval duration varies based on the lender's policies and complexity of your financial situation.
What can cause low credit scores ?
Missed or late payments, high credit card balances, limited credit history, and several credit inquiries in a limited period can all affect your credit score.
Which lenders offer bad credit loans ?
Several lenders offer bad credit loans in India. Banks, non-banking financial companies (NBFCs), and peer-to-peer (P2P) lending platforms are the country’s most common lenders of bad credit loans.