7 Tips on How to Get a Personal Loan with a Bad Credit Score
Although the term ‘credit score’ has been here for a while now, people aren’t yet aware of what it is. That doesn’t really make any difference until the day they apply for a loan, and the lender refuses to approve their application due to a low credit or CIBIL score.
When applying for a personal loan, you must keep in mind that the loan issuer or the bank will always go through your credit report before approving one. And your credit or CIBIL score is one of the most vital aspects of your credit history. A low credit score can make it difficult for you to get your loan sanctioned.
But, the good news here is- even though you have a low credit or CIBIL score, you can still succeed in securing a loan. Here’s what you need to do.
- Your income is the savior
Simply put, a borrower’s income can play a major role in the sanction of a personal loan. When you can convince the lender that your salary or income is sufficient enough to repay the loan, they might approve it, while keeping your low CIBIL score aside. Showcase necessary documents like a pay slip or any other evidence of your income to prove your creditworthiness. Additionally, you can also share your educational certificates and bank statements.
- A low personal loan amount works
A poor credit or CIBIL score may create a bad first impression on the lender’s mind. He might end up assuming you to be a high-risk applicant and doubt your ability to repay the loan on time. However, that shouldn’t stop you from approaching them to get your loan approved.
For starters, apply for a lower loan amount, to win over the trust of the loan issuer. When the loan amount is lower, the risk perceived by the lenders will reduce and they may grant you the loan.
- Mistakes in your credit score are a big no
Go through your credit score every now and then to check for errors. On reviewing your credit score, you may come across mistakes like a misprinted name, or the latest updates missing on your report, which can impact your overall credit score. Therefore, resolving errors in your credit report is a must-do. Not only will this lead to a better CIBIL score, but also make it super easy for you to acquire a personal loan of your choice.
- Say yes to a collateral based loan
Do you own assets such as real estates, gold, FDs, etc.? In that case a low credit or CIBIL score won’t be able to hinder your personal loan application. Simply opt for a collateral based loan, which requires you to pledge collaterals for acquiring a new personal loan.
According to the lender, the collaterals are a proof that you are financially stable and can pay back the loans on time. Moreover, they act as valuables which can be sold off in case you fail to pay it back.
Please note collateral based loans can enable you to avail large loans depending on the value of the collateral. They also come with lower interest rates.
- Find yourself a co-applicant
A co-applicant or guarantor with a good credit score and report can help you to avail a personal loan real quick. They will apply for the personal loan along with you, while agreeing to repay the loan in case you fail to do so. It is preferred that your co-applicant is a family member of yours who should be well informed about the motive behind your decision to avail a personal loan.
The co-applicant has to complete the KYC process and the lenders will check whether the former has a steady flow income and can make timely repayments. Once the co-applicant meets all of the mentioned criteria, you are good to go.
- Ask for someone else’s credit score
It’s no secret that credit score can impact the most vital purchase decisions of your life. And it makes sense when you want to raise the score fast. There must be a solution, right? The simple answer to this is yes.
You have to look for someone, preferably a friend or family, who has a good credit or CIBIL score and ask them to add you as an authorized user to their credit card. This will enable you to get yourself another person’s credit card, and consequently their credit history will reflect on your credit report.
- Get your credit score marked with NA or NH
This is yet another way by which you can avail a personal loan without a CIBIL score. Reach out to lender and ask them to consider your case and mark your report with NA or NH. A NA or NH refers to no credit activity in the last 36 months or no credit history. However, if approved, you may have to pay higher rates on interest.
Also, if you’re worried if the NA or NH mark will negatively impact your credit report, calm down. By acquiring a loan with a NA or NH on your credit report, and then paying it back in a timely manner, you will only add to improving your credit score.
Wrapping it up
To wrap it up, a personal loan with no or bad credit score is not that difficult to avail as it may seem like. Some careful planning and a few measures are sure to take you a long way. However, if you get the personal loan despite having a credit or CIBIL score at all, ensure to gather adequate funds to repay on time. If you fail to do so, your credit report will let you down.