- June 12, 2020
- Posted by: Ganeshcbani
- Category: Blog
Getting a personal loan is one of the most common financial decisions that people make. But what if your credit score is low? In this article, we’ll discuss whether you can still get a personal loan with bad credit and some of the factors that go into your approval.
Personal Loan With Bad Credit
Whilst the credit value is a numerical term of three digits that enables lenders to determine the creditworthiness of the borrower, other elements combine to exceed the 3-digit amount. The credit score ranging from 300 to 700 is a financial report card with a score above 750 considered as good, with an average score between 550 to 750 and a score below 550 being poor or bad.
When you have good credit score in personal loans, you can only receive high interest personal loans for average credit score and in some cases for poor credit score.
Ways to get personal bad credit loans.
Prove you can afford EMIs
Right after the credit, the income is taken into account by the lender. One way to get personal credit loans is to show that you are willing and able to pay EMI. If you can persuade the lender that you have a normal and secure employment, the approval chances are higher.
Apply or secure a guarantor with a co-signer
Personal bad credit loans can also be made with the assistance of a co-signer or guarantor. Using the co-signor lets the lenders find the credit score of the co-signer, thereby increasing their chances of approval. Likewise, having the guarantor would boost the trust of the lender that the loan payments will not be defaulted.
Another safe way to secure personal credit loans is through the provision of collateral. Collateral is like a guarantor but an asset attached to the loan. On failure to pay, the lender has the right to sell the collateral and to recover the balance of the loan.
Request a lower personal loan
If you have a bad credit value, the chances of any type of loan being approved are lower. Personal bad credit loans can be made, however, if you ask for a lower personal loan amount. This reduces the risk of a default on a borrower because the borrower must give a smaller amount.
Fix the errors in the credit report, if any
Many times, errors and errors in the credit report can lead to poor credit rates and thus influence credit opportunities. Check your free credit report once a year online to see if any mistakes or errors are reported.
The above measures can help to obtain personal loans for bad credit. However, the easiest and safest way to boost your credit score over time and then apply for loans.
When do you need a bad credit loan?
- Bad credit credits should only be used if necessary, which can be in any of the situations below:
- Many lenders have rejected your loan application because of your low credit rating.
- You defaulted on fees for your credit card.
- You have no other way of managing your existing debts.
- Your financial situation has improved and you can repay your credit value with a loan.
Keep things in mind before you get a bad loan
- Before you decide to use a bad credit loan, ensure that the following points are taken into account:
- Make good research and explore the advantages of different lenders. Select a lender with lower interest rates.
- Check your eligibility before applying for a wrong credit loan, to insure that your loan application is not denied so it might further harm your credit value.
- Go carefully through the terms and conditions of poor loans so that there are no surprises later.
- Before you decide to apply for a bad credit loan, evaluate your repayment capacity.
How to improve and obtain personal bad credit loans?
From the first 2 questions, you can see that this is a vicious cycle – you need a good credit to get personal credits and credit cards, but it is difficult to get one once you have a bad credit score. The only way you can boost your reputation is by paying your dues consistently and carefully. It’s even worse. You may think there is no way out of this cycle.
How to improve your credit score more quickly?
If you have any unpaid duties or have “settled” or “printed down” claims on your credit report it is easier to refund them and have “closed” accounts. This will automatically increase your ranking. Many lenders are now providing credit for score building. It could be a private loan or a credit card. These products are either short-term or do not provide the lender with any significant advantages or risk. These products help the person without a credit score to the scoreboard, which will help if they need credit for an important reason.
A individual may also go for secure credit where a collateral like a fixed deposit is required to buy the product. For example, a individual may use a secured credit card to position a collateral as a Rs.100,000 Fixed Deposit. Now the consumer has 3 advantages. The first is the bank’s charge of interest on a fixed deposit. Secondly, when you get it without any collateral, you will be able to receive a credit card with all the benefits and a lower interest rate on the card. You can only have a credit limit of Rs.60,000 as card issuers require only 60 to 70% as a credit limit. But a person’s overall benefit from a secured credit card is high.
Which loans do Bad Credit offer?
If you have a poor credit score, it may be beneficial to pledge collateral for loans. If a collateral reduces your lending risk, you can negotiate with the lenders to give you lower interest rates. Such collateral / security lending is known as secured loans.
However, if you are not willing to make a commitment and are pursuing unsecured loans, you may become eligible for a loan if your monthly earnings are higher and you work for a reputable company. In such cases , banks charge you higher interest rates and are likely to receive lower credit amounts. For example, if your eligibility for loans under normal conditions is approximately 80 percent to 90 percent, it is 65 to 70 percent due to your bad credit score. There are also ways where shorter repayment tenures may be given as banks would consider receiving the loan as early as possible.
Besides the banks, you can try two other ways if you have a bad credit rating and want to make use of a personal credit–
Non-Banking Financial Companies (NBFC)—Many NBFCs give you personal loans given the low credit score, but they that charge a slightly higher interest rate. Normally when it comes to credit scores, NBFCs are more flexible than banks. Some NBFCs have credit loans that are as small as 360.
Peer-to – Peer Lending (P2P)-Some lending websites, known as P2P websites, offer loans to Rs.5 lakh, with tenures of 12 months to 60 months for low-credit persons.
Are there any options for bad credit loans?
Yes, before you decide on a bad loan, you can consider limited alternatives. The following are:
Talk to your current financial provider to offer a customized loan for your circumstances. The current financial provider can help you in this regard, rather than going to a new provider for a loan.
You will get a 0 percent interest rate overdraw on your current account for a certain period. Never cross your overdraft limit because the arranged overdraft charge is very expensive.
Credit unions operating within the community can offer banks a real alternative to people experiencing financial difficulties. You must be a credit union member to take advantage of the loan. They are supportive and their main intention is to serve their members.
Credit cards are another option for people with a bad credit history. Dedicated cards for people with poor credit scores are available. Although they may have lower credit limits or higher rates. Also remember that a missed request will further damage your credit card.
Payday loans are available. But it is recommended that this loan not be taken.
Make use of your own savings as long as possible. It’s better to use your savings than to pay high interest on the loans.
The Government also provides interest-free budget loans for those who can not afford to rent. But those with urgent needs will only be granted the loan.
Turn on a loan to your family and friends. You can conclude a mutually beneficial agreement, and they will understand each other much more than any financial institution. You should decide on an value that is workable. See clearly how you are going to make a refund, as there is a good chance that this will affect your relationship. Accept and commit to a certain timeline.
Regardless of the problems, keep away from the loan sharks. Consult your current lender and make an arrangement that will save you from poor credit records and stop defaulting payments. The lender will always help and advise you on your current financial status.