See what you need to do to get a personal loan if you have a bad credit score.
Your credit score could be poor for a variety of reasons, including those listed below:
When you apply for any type of debt, including a personal loan, your credit score is the first thing a lender looks at. Your credit score is a summary of your credit history, including all debts you’ve taken out, payback history, and repayment ability that makes a way for your loan.
Applying for a personal loan, like any other loan, mortgage, or credit card, can result in a minor drop in your credit score. This is because lenders will have to run a hard inquiry on your credit, and each hard inquiry appears on your credit report, lowering your credit score slightly. Keep in mind, however, that this drop is only temporary, and that maintaining good credit habits will help you raise your score over time.
Having said that, it’s worth it to be as strategic as possible when it comes to applying for a personal loan. Because a hard inquiry is run for both applications, applying for a personal loan soon after applying for a new credit card could result in an even bigger drop in your credit score.
On the plus side, taking out a personal loan can help you build a track record of making on-time payments, which will improve your credit score. This is particularly true if you were approved by a lender who accepts applicants with a poor credit history. Payment history, which accounts for 35% of your credit score, is the most important factor in determining your credit score. Making on-time and full monthly payments can indicate to a lender that you are very likely to repay any money you borrow in the future. Your credit score is likely to increase as a result of consistent on-time payments.
A personal loan can also aid in the improvement of your credit score. Your credit mix accounts for 10% of your credit score and refers to the various types of credit accounts you have, such as credit cards, student loans, mortgages, and so on.
That’s not to say you should go out of your way to take on various types of debt; however, having a variety of accounts can demonstrate to lenders that you can manage various types of credit. This can help you appear to be a creditworthy borrower (as long as you don’t take on too much debt).
Your credit score is one of the most important factors in determining whether or not you will be approved for a personal loan. It reflects your creditworthiness, prudence in repaying previous loans and gives your prospective lender confidence in your ability to repay the loan thus assuring you to take a personal loan.
Personal loan applications are frequently denied due to the applicant’s bad credit score. However, even if you have a bad credit score, you can still get an instant personal loan.
Banks have traditionally been the go-to place for personal loans. Banks have stringent lending criteria that place a high value on a person’s credit score. A poor grade is enough to throw the borrowing process off track. However, non-banking financial companies (NBFCs) are a new type of lender that has more lenient lending standards than banks.
Though NBFCs keep a close eye on your credit score when approving your loan, you have a better chance of getting approved even if your credit score is poor However, the amount could be lower, and the loan would be taken out at a higher interest rate. Visit the Sonimoney website and enter your basic information to get a free CIBIL check.
Note that personal loans are an unsecured mode of finance. This means you don’t have to pledge any collateral for availing them. Offering collateral for this loan on a poor credit score might prompt your lender to re-think their lending decision. It might also lead to sanctioning your loan.
A collateral is a backup for your lender to recover the dues in case of a default. However, before offering collateral, ensure that your lender has such a provision.
If you don’t have a healthy credit score, you can apply for a joint personal loan with your spouse or a relative who has a better score. While sanctioning the loan, lenders consider the credit score of both applicants.
Thus, a healthy score of your spouse or relative enhances your chances of procuring a personal loan.
This is another effective way of availing of a personal loan with a bad credit score. In legal terms, a guarantor is liable to pay off the loan in case of a default and acts as the principal borrower. Choose a guarantor with a good credit score. Financial institutions may have their norms while accepting guarantors. Some of the standard norms are:
Even if you have a low credit score, a secured loan is easier to obtain. Take out a loan against gold, a PPF, or any other type of financial asset. These will serve as financial collateral, allowing you to obtain a low-interest personal loan.
You can also apply for a personal loan on a bad credit score when you get an increment. An increment facilitates your repayment ability. You can also check if there’s a collaboration between your employer and the lending institutions. Such collaborations might help in availing of a personal loan
With pre-approved offers from Sonimoney, availing of a personal loan and other loans such as business loans, home loans, etc., is a hassle-free affair. Check your pre-approved offer today to check your eligibility for a personal loan.
Getting a personal loan without a credit score is not possible. As personal loans are an unsecured form of a loan, it is difficult for a lender to determine the risks associated with lending to a borrower with no credit score for a personal loan.
You either have the option to start creating your credit history, which is again a long due process, or you can consider the following options for your approval for a personal loan. Please note that even these options will be challenging since most lenders insist on a good credit score before accepting a loan application.
Collateral loan: You can opt for a loan by pledging your assets like saving certificates, gold, shares, and other valuable assets required for the loan authenticity. It will also help in building your credit journey and generating a credit report thus increasing the chance of getting a personal loan.
Peer-to-peer lending: if you are looking for a smaller loan amount then P2P lending is a good option for you. Yes, it comes with a high rate of interest.
Get a Personal Loan: if you are salaried and have a bank account, you can approach your banker for a credit card. However, if you are not eligible for it then you can consider getting an overdraft facility using a fixed deposit as collateral. Alternatively, you can apply for a joint credit card with a family member who is eligible for one. Timely payments of credit card dues and responsible usage will help build a good credit score.
Using the above options, you can get a personal loan without a credit score. And meet the urgent requirements of funds, but it adds to complexities and a tiresome process.
The most authentic way is to first credit profile or improve your credit score, before applying for a personal loan, To see if you’re eligible for a personal loan, connect with our credit experts.
Read more blogs, by clicking here Get a Personal Loan in India | Business Loan Documents | Home Guarantee Scheme | Instant Personal Loan without documents | Myths About Credit Cards | Loan Against Property in Mumbai | How to Improve Cibil Score Quickly
