It is very easy to avail of a personal loan without much hassle. It is also called the unsecured loan which means that you don’t need any collateral or security. However, it is very important that you have a high credit score for that. Otherwise, it can be difficult to obtain a loan with a bad credit score.
Whichever bank you may approach, they will always consider the credit score for providing the loan. Therefore, you have to conduct various checks that help them understand your creditworthiness. Here, you will know about how you can get a personal loan with a bad credit score.
What factors lead to bad credit score ?
Before proceeding to the tips, it is also important to know the different factors that cause a low score of credit. Read below to know about it.
Failing to pay the bills on time – The major factor leading to a low credit score is paying bills of your credit card on time. So, you must be careful the next time to pay your bills.
Application for credit failed – If you have a poor credit history then your credit application can get rejected. In turn, it will affect your credit score. Thus, it is very important that you maintain a good credit history.
Failing to make timely payments of EMIs –Thirdly, if you take a loan and do not pay its installments on time, then it will affect your credit score as well.
No Financial History in the Past – Another reason is that you have not applied for any loan before. As a result, there is no financial history leading to a bad credit score.
Hence, if you have come across these above factors, then it will lower your credit score. Thus, it is not good for any customer applying for a personal loan.
When You Should Get A Loan With Bad Credit Score?
As now you know that getting a personal loan with a bad credit score is really difficult and risky. So, it will be best that you should only take a loan only when it is urgent. These are the following situation when you should apply for a personal loan with a bad credit score.
- You can now afford the repayment of the loan and improve your credit score.
- Your application for a personal loan is rejected by various lenders and banks.
- You have no other option to manage your financial situation
Tips to Follow To Get Personal Loan With Bad Credit Score
These are the following tips that can be helpful to get a personal loan with a bad credit score.
Show proof that you can do the repayment of the Loan
Firstly, you have to make the bank believe that you can repay the loan. As you know, a personal loan requires less documentation, so you have to collect the right documents. These documents will require proof related to your income that is appropriate for the loan amount.Along with that, if you can prove that your current situation is better, then the chances to get a loan will increase. Furthermore, it will be better if you mention any additional income if you have while applying. Thus, proving that currently, you have a stable income flow and a secure job will help you to get a personal loan.
Applying with a guarantor will help
Secondly, if there is no other way, then you can apply with another applicant. Apart from that getting a guarantor for your loan can also help a lot. But, you must remember that the guarantor or a co-applicant for the loan should have a high credit score.
Moreover, the guarantor should also complete the necessary KYC protocols successfully. Also, you must know that if you fail to pay the loan, the bank will hold the guarantor accountable. Thus, the guarantor will have to complete the loan repayment.
Apply for a low amount for a personal loan
Before applying for a personal loan with a bad credit score, evaluate the amount you need. It will be better if you apply for a lower loan amount. As you know, that having a bad credit score will make you a risky candidate in the eyes of the bank or the lender.Thus, if you consider paying a loan of a lower amount, then it will be better. Then, the lender or the bank may consider providing you with the loan. However, the interest rate will be higher as you have a low credit score.
Remove Errors in the Credit Report
The next important tip is to remove any error in your credit report. After trying various methods, if you still find that the credit score should be higher, there must be an error. Due to the errors, the credit score remains low. It generally happens when your loan repayments are not reported to the CIBIL.So what you can do? If you find any fault or error in your credit score, then you can correct them. As a result, you will find that the credit score is increased with the updated information. Thus, now you can try applying for a personal loan with an updated credit score.
Do A Thorough Research
Additionally, another crucial tip that can be helpful for you is doing thorough research. By doing that, you will understand which bank or online lender is offering a loan that is appropriate for your needs. Along with that, you can also get a personal loan with a low-interest rate.Apart from that, you can also find an eligibility checker available at various websites of banks. You just need to put your information such as income, credit score, loan amount, etc. In this way, you will be able to apply for a personal loan with a bad credit score.
Give Collateral For Your Loan
Another major tip that can help you is providing collateral for your loan. It will reduce the risk of loan repayment in the eyes of the lender. As a result, the chances of getting a loan will improve simultaneously.Thus, in case if you are unable to repay, the bank will recover the amount from the collateral. The bank or the lender will put it on auction or sell the collateral to get back the loan amount. Hence, the collateral can be a gold ornament, or a property, etc.
Pay Your Taxes on Time
Filing Income Tax returns can be a huge advantage for taking a loan. The bank will positively look at this factor. However, you must have a record of your returns of Income Tax for the past 3 years. Hence, it will open new opportunities for taking loans easily.So, when you are going to apply for a personal loan, show the proof of your Income Tax return. So, it will reflect that you are consistent about your debts and responsibilities.
Other Alternatives For Personal Loan With Bad Credit
These are other alternatives to find a personal loan with a bad credit score. Read below to know about it in detail.
Various websites offer peer-to-peer lending. If you have any financial emergency, then you can avail of a personal loan worth Rs. 5 lakh. You can get a loan with a tenure ranging from 12 months to 5 years. Thus, if you don’t find any other option, then peer-to-peer lending can be the right option for you.
NBFC or Non-banking Financial Companies
Various Non-Banking Financial Companies offer personal loans to people having a bad credit score. However, the rate of interest can be higher than others. Generally, NBFCs are great and flexible to get a loan with a lower score of credit up to 360.
If you have a credit card, then you can easily avail of a personal loan instantly. Most importantly, various credit cards are specifically designed for people with a bad credit score. However, this alternative can also cost you with higher interest rate.
Take Help From Family and Friends
If you are unable to get a loan due to your bad credit score, family and friends can be helpful. As you already have mutual trust and understanding, it will be easier to get a loan from them. Apart from that, you can also avail yourself of a low rate of interest when taking a loan from friends or family members. But, you must be cautious and pay the loan on time to maintain a good relationship.
Don’t Apply for Too Many Loans At Once
Applying for a personal loan at different places at once can affect your credit score further. If a lender rejects your application then it will push down your credit score. So, it is better to only apply when you know that the bank will approve your loan.Therefore, if you are eligible, you can take a personal loan instantly within 30 minutes. But, having a bad credit score can make your task difficult to find a lender. Henceforth, the above tips will help you to get a personal loan with a bad credit score.
Name- Ritadeep Roy
Blog URl- https://roopya.com/blog/
I am Ritadeep Roy from Roopya.com, digital marketer who loves to write about fintech, marketing & personal finance. Helping businesses with a correct content strategy & paid marketing solutions for 3 years