Having a poor credit score is like having a huge burden when you badly require a loan. The general perception is that no other bank or financial institution would lend money to those who have poor credit history. However, the fact is that it is quite possible to secure a loan even with poor credit. All you have to do is to be aware of the proper alternatives, tactics, and planning procedures.
In this blog, we are going to discuss how to take simple, clever, and efficient loans despite the poor credit score.
What Does Bad Credit creep to actually mean?
A credit score gives an idea of your credit history, how you use the credit, previous loans and your financial behaviour.
In India, ratings below 600650 are usually bad. The low score is normally a sign of missed EMIs, heavy usage of credit cards, defaults, or poor credit history.
But remember:
👉 In low credit score, you are not prevented to take a loan.
👉 It just implies that you have to select the appropriate type of loan and appear as an honest borrower.
1. Look into a Secured Loan- The Easiest Route to Bad Credit.
Secured loans are the most secure when you have a bad credit score.
What is a secured loan?
A secured loan using property, gold, vehicle or FD.
Why is it helpful?
- Lenders are also assured as collateral minimizes risk.
- Interest rates are lower
- Even bad score has high chances of approval.
- Loan amounts can be higher
Examples:
✔ Gold Loan
✔ Loan Against Property
✔ Loan Against Fixed Deposit
✔ Vehicle Loan
This is the quickest and simplest way to be approved of in case you possess any form of asset.
2. Find NBFCs – More Flexible than Banks.
The Non-Banking Financial Companies (NBFCs) are famous in terms of relaxed eligibility qualifications.
Why choose NBFCs?
- Quick approvals
- Relaxation of credit score requirements.
- The increased chances of approval of low-score applicants.
- Minimal documentation
NBFCs would make an excellent choice in case of urgent need of money, although they may have slightly higher interest rates than banks.
3. Apply to get a Joint Loan / Co-Applicant.
In case you have a poor financial profile, adding a co-applicant who scores good on credit is likely to make a huge difference.
Benefits of a co-borrower:
- Lenders see reduced risk
- It is possible to obtain higher amounts of loans.
- Interest rate may be lower
- Approval becomes smoother
Your co-applicant may be a spouse, a parent or a sibling.
4. Use a Guarantor to Enhance Your Application.
Guarantor is a person who signs the loan agreement and guarantees the lender that the money will be returned even in the instance of your default.
This helps because:
- The lender has confidence in the financial obligation of the guarantor.
- Applicants who score lowly are easily approved.
- It is able to get improved loan conditions.
Nevertheless, select a guarantor carefully as they are the ones who will be held accountable as regards to repayment.
5. Learn about P2P Lending Platforms-A New Approach.
The peer-to-peer (P2P) lending sites have borrowers and lenders linked up.
Why P2P works for low credit:
- Lax credit score conditions.
- Quick disbursal
- Less paperwork
- Competitive interest rates
Such sites as LenDenClub, Faircent, RupeeCircle tend to accept borrowers that are denied by regular banks.
6. Present Excellent Income Evidence- It Matters a Lot.
Lenders can still grant you a loan even with a low credit score provided that you have a stable and adequate income.
Provide evidence such as:
- Salary slips
- Bank statements
- Form 16
- ITR filings
Good income will testify that you will be able to pay the loan in a consistent manner that makes up the low credit score.
7. Apply First to get a Smaller Amount of Loan.
Small loans are viewed as being low risk by lenders.
Instead of applying to borrow a lot of money, borrow a lesser amount.
Why this helps:
- Higher approval chances
- Easy repayment
- Fix your credit rating.
- Paves the way to larger loans in future.
When you pay off this successfully, lenders have a lot of confidence to lend larger loans to you.
8. Before (Unless Urgent) Applying, Improve Your Credit Score.
When you do not require urgency, a good idea is to enhance your credit rating in the long run.
Fast methods of boosting your credit:
- Pay credit card bills on time
- Clear outstanding EMIs
- Reduce credit usage below 30%
- Do not apply to several loans.
- Contact and remedy mistakes in your CIBIL report.
An improved rating translates to improved interest rates and an increase in loan quantities.
Final Thoughts
There is still a future of your financial prospects when you have a low credit score. Fewer or more secured loans, NBFCs, guarantors, P2P platforms, or joint loans- the list of opportunities to raise the required amount is long.
It is only important to represent as a sensible borrower and choose the suitable type of loan depending on the circumstances.
Through good planning, wise decisions and repayments on time, not only can you take a loan, but also restore your financial reputation.
Read More: Boost Your CIBIL Score Lightning Fast: Do This Today!
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