How to Get a Personal Loan with Low Credit Score?

Personal loan with low credit score

Personal loan with low credit score

Do you have your urgent requirements pending, but you are still waiting for your salaries to go up? You want to impress your relatives with new decor this new year, but savings cannot meet up to expectations. You want to go to a promising but expensive institute but the fees are! Can you manage these expenses with your savings or you will delay all the events in your life till you save much?

The Bigger Question is What to do if Your Credit Score is Not Enough?

  • In this article, we will go through the topic one by one and understand how to get yourself a personal loan without paying unusual interest rates.

Also, we will:

  • Try to choose a perfect Bank from the available options
  • Comparing Interest rates
  • Quick fixes for your Credit Score and what experts say when it comes to Credit Scores.

A credit score is a very vital factor when it comes to approving a loan. It determines your repayment capacity and creditworthiness to lenders. A score of above 700 is considered excellent by lenders. People with high credit scores can get personal loans quickly with low-interest rates. But what can you do when your credit score is below 690? A few bad practices when it comes to handling your credit reflect in your credit report for a longer period of time. But here, you have a chance to rectify those mistakes and start making healthier choices for your credit score.

What is a personal loan? Personal loans are unsecured loans that don’t need any collateral to submit. It is beneficial when you need money in a short time. You can use it for any purpose, such as higher education, weddings, medical bills, vacation, paying outstanding dues, etc. With a good credit score, you can get eligible for a loan with better benefits in interest rates and repayment tenure.

Importance of Credit Score

Record of your present and past credit behaviors:

Most financial institutions will check your credit score to examine your credit behavior. Whether you have bills pending in your name, or you have surpassed your credit limit, pay your EMIs on time, or you wait for further notices issued in your name by banks and credit unions. Upon that, lenders decide whether to reject or approve your application for a loan.

Makes you Eligible for Loans:

Banks and NBFCs consider a CIBIL score of 750 and above ideal. Hence, a borrower needs to put a tap on your credit behavior from time to time.

With tracing your credit score, it is essential to learn what measures should be taken by the borrowers to keep their credit score sound, not just for the current borrowings but for future endeavors too.

A good credit score not only wins you reasonable interest rates but also helps you to catch good interest deals for future borrowings. Like, Home Loans, Car Loans, and Mortgages.

Banking Moguls always stresses keeping yourself updated with the market rates when it comes to personal loans on lower credit scores.

What can you do with your Low Credit Scores?

A poor credit score or lack of record keeping can make your personal loan journey difficult. But certain options are available in the market that can help you to get hold of your credit score journey a bit easier. Here are other loan options you can go for when you have a low credit score

Loan Services Interest Rates Tenure & Benefits
Gold Loans 7% ● Loan Amount is 75% of the gold value. The quality of the loan is determined by the lender.

● Usually, they are short-term loans, whose maximum limit can go up to 24 months.

● Minimum tenure would be around 6 months in case it is a short-term loan, repaid in a lump sum.

LAP(Loan Against Property) 7.35% onwards ● Amount depends on the quality of the property you want to put up against the loan amount.

● On the repayment capacity of the borrower.

● Some lenders offer LAP tenure of up to 20 years.

● Helpful for those who want a huge amount.

Loan against Security Depends on the collateral you provide. ● If you have mutual funds, debentures, and shares in your name, you can avail loan against it.

● Loan amount and interest rates depend on the securities against which you want to avail of the loan.

● Before lending, the lender mainly focuses on the LTV ratio, current market conditions, and risks involved with the securities in question.

Top-up Home Loans 8% onwards ● If you have taken a home loan, you can avail Top up Home Loan and protect your credit score from going down.

● Top-up home loans purely depend on the current balance in your account.

● Interest rates usually start at 8%, which can vary from one Bank to another.

● Use your top-up home loan for other uses also, unlike your home loan.

● You can enjoy long tenures to pay back your top-up loan amount.

What can make your Credit Score Go down?

What can make your Credit Score Go down

  • Missing your Deadlines:

Your payment history reflects directly in your credit report. If you have a habit of missing your deadlines, it will lower your credit score in the longer run. It shows that the borrower is not responsible for their credit. So if you don’t want your application rejected by banks, don’t forget your deadlines.

  • A high outstanding on your Credit Card:

We love to go on shopping sprees, festivals, new collections in the market, and holidays; you need a wardrobe for that, Right? Well, that can put a huge outstanding on your credit card. Even if you make all the payments in time, a high debt reflected on your credit card can affect your credit score. Keep your credit card usage low, the least you can do is keep your balances below 30% of your credit limits. Banks usually provide attractive offers from time to time to new and existing customers. That can help you to avail good cashback from time to time. Plan your spending wisely and make the most of your card without affecting your credit score.

  • An unhealthy mix of Credit:

Good mix categories include secured Credit such as Car loans, home loans, or mortgages with unsecured Credit like credit cards, and debt consolidation loans. If your credit score reduces your chances of getting a credit card or an instant personal loan, you can get more types of Credit products to your mix. This way, you will reduce your reliance on only one type of Credit.

  • Not using your Credit Card:

If your card is sitting idle in your pocket, it can affect your credit score in the long run, as some Banks and Financial Institutions charge maintenance fees for that. While you must be curbing your expenditure, your bank can charge you money for no activity.

Well, you can use your card for a Netflix subscription, pay your monthly OTT bills and enjoy, remember to put a timer on your cell phone or auto payment options so that you will remember your payments.

So, Check your Credit Score Now and keep a track of your Credit health!

Also Read: Know The Different Types Of Credit Score

Tips for Getting an Instant Loan With a Low Credit Score

Tips for instant loan with low credit

It is true that with a low credit score, the chances of availing of a personal loan go down. But this cannot prove that you can never hold the chance to get one. Through some simple steps, you can easily avail yourself of an urgent personal loan in no time.

  • Your Salary can support EMIs:

A personal loan with a low credit score is possible if recently you have received a hike in your salary, or you have developed a new source of income, you can present your salary slips to Banks or NBFCs to avail of a personal loan. With a stable source of income, you can have the trust of the Bank, and NBFC personal loan for a low cibil score won’t be a problem as you won’t be losing out in paying EMIs or will be a defaulter altogether. However, you may end up paying more interest rates, but it will surely increase your creditworthiness.

  • Widen Your Search:

When you have a low credit score, the chances of getting a loan rejection from banks are higher. Thus, you can go forward with a loan application through new-age NBFCs or Banks that are low credit score personal loan lenders. They provide loans to people who have bad credit scores also. You might get a higher interest rate or a minor tenure for your loan. So when you need urgent loans and want a personal loan with bad credit, you have to broaden your search to know about all other sources. As having many options can raise your chances to get an instant loan with a low credit score.

You can check the website of Buddy Loan, to learn about attractive offers on personal loans. Buddy Loan is one of the largest loan aggregators in the country.

  •  Have a Good Relationship With lender:

If you have a low credit score loans can seem to be a difficult option for the applicant. But you can consult your bank or lender with whom you have a long relationship and explain yourself for getting an urgent loan for your emergency. They can help when you show them evidence of your income and job stability. Once they are on good terms with your repayment capacity, you can easily avail of a hassle-free loan.

  •  Add a co-applicant:

Despite having a low credit score personal loans can become a bit of a tricky business. Although you can still apply for a loan online by adding a co-applicant with a good credit score. You can request your family member or friend, with a stable income and responsible credit report, to become your co-applicant.

As a higher credit score lowers the risk factor of your application, you can easily avail of a personal loan in comparison to an instant personal loan with a low credit score, which makes you a risky borrower. Before approving your loan, lenders will verify your credit history, report, and income details to ensure they can pay back even if the primary applicant failed to pay back.

  • Opt for a smaller loan:

If you have a low credit score it is better to start with a lesser amount. Because it’s easier to repay the loan as the EMI and tenure will be less. Paying it back on time will gradually increase your credit score and benefit your future transactions. Although the tenure period differs from one lender to another, it generally varies between three months to a maximum of two years. Some lenders can offer low credit score small loans for a short period of 15 days as well.

  • Analyze your Credit Report carefully:

Sometimes, the reason for loan rejection or low credit score lies in your credit report. The error may be due to failure while updating the latest information against your record. Low credit score personal loan lenders usually charge higher interest rates but if you want to avoid that you should into ways to improve that. The factors that can affect your credit score are:

  • History of payment-The history of payments showcases the pattern or habit of the applicant. If they make payments on time, do they miss deadlines? If they miss the deadline, how many days do they take to pay the required amount?
  • Ability to bear the loss, i.e., Credit Exposure What is the maximum amount of loss an applicant can bear if he or she fails to pay the credit amount?
  • Type of Credit: Either you took revolving credit or installment or Non-installment type credit. That speaks a volume about the applicant’s credit habits.
  • Credit Utilization Limit – Your credit utilization ratio is one of the most critical factors of your credit score—keeping it low is key to top scores. Your credit utilization ratio should be 30% or less; the lower you get it, the better it is for your credit score.
  • You can calculate the credit utilization limit by dividing the amount to be paid by the available credit limit. It accounts for 25% of your credit report, so something to be taken seriously.
  • Credit Inquiries:

    After applying for any credit product like a loan or credit card, Banks or financial institutes thoroughly investigate the applicant’s background. These inquiries are profoundly detailed and take time. During this inquiry, if banks discover that the applicant is also applying for loans and credit cards in other banks, that can affect the applicant’s credit score. It can be challenging for the applicant to get lower interest on the loan or a personal loan altogether. One has to be clear of their motives from the very beginning to avoid any difficulties in the later stages.

  • Credit Mix:

    Credit Mix is a mix of secure as well as unsecured loans. In a situation where the lender pledges particular assets of the applicant, that is called Secured Loans. It includes home, car, and other bigger loans that are big in terms of amount and repayment tenure. On the other hand, unsecured loans do not require any asset as a security from the applicant. If the banks see that you have already dealt with different credit situations, that can help build trust in the bank and customer relationship.

Try to make a copy of the credit report at least once a year and ensure it is free of errors. Build a healthy credit score to ensure your success rates in future borrowings.

A Few Tips and Tricks to hike your credit score in No Time

  • Check credit score:

    You have to follow the practice of reviewing credit reports regularly. It will help you get awareness regarding your credit history. You can monitor if there are any missed payments or errors. Checking credit scores will help you rectify any incorrect details in your report. Buddy Score will help you to learn your credit score.

  • Make timely payments:

    Your payment history influences your credit score by up to 30%. Thus you have to focus on-time payments and not miss any dues. You can set a reminder for your monthly payments.

  • Maintain credit utilization ratio:

    You must maintain your credit utilization ratio below 30%. It shows how much credit you have used from your credit limit. You can request your lender to increase your credit limit if you have difficulties.

  • Avoid multiple loans at a time:

    During necessity, you should avoid applying for loans with various lenders. Because a hard inquiry will follow each loan application, which eventually affects your credit score, so apply for one loan at a time to avoid any hard inquiries in the credit report.

  • Keep your old accounts open:

    Even if you are not using your old accounts, maintaining those accounts will increase the length of your credit history. Therefore, it gives more chances for you to display your consistent credit history to lenders.

  • Applying for new credits:

    Getting new credits and paying them off on time will help you improve your credit score.

  • Pay off old debts and outstanding dues:

    Creditors will not look further into payments over “charged off” debts. So if you plan to pay on a charged-off account, it will activate the account and the old debts. Thus it will affect your credit score badly.

  • Consolidate the debts:

    If you have piled up outstanding debts, you can get a loan to consolidate your debts. Instead of paying various debts, you can go with one debt. If you get a lower interest, you can pay off all other debts together. It will increase your credit utilization ratio and credit score.

  • Diversify and alter your account:

    Your account should have a mix of credit such as credit cards, personal loans, mortgage loans, etc. When you pay these dues on time, then it will improve your credit score.

Also Read: A Detailed Guide On The Crucial Tips And Tricks To Improve Your Credit Score!!

Few Tips and Tricks to hike your credit score

On Final Note:

With the latest trends in the market, now you can fulfill your dreams by availing of personal loans even with low credit scores. And in the trail of that, you can also improve your credit score through some Loan options discussed above. The plan is to keep tapping on your credit score report and compare offers that can help your plans effectively.

Buddy Loan, one of the largest loan aggregators in the market, can help you to plan your loan journey effectively, without losing yourself in the mix of different offers and interest rates in the market, and will keep you updated with the latest, that experts in the market are discussing.

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FAQs

Q. Will I get a personal loan even if my credit score is bad?
A.
Yes, some lenders offer loans even if you have a poor credit score, but may charge you high-interest rates. So to avoid this, it is best to improve your credit score by making timely payments, repaying your past dues, and reviewing your credit report once a year regularly. If not maintained properly low credit score loans can affect your loan-gathering business for a very long time.

Q. How do I check if I can apply for a personal loan?
A.
Lenders usually make it clear on their websites. Basic requirements like age, salary, and nationality to get a personal loan are mentioned on every platform already.

You can use a personal loan eligibility calculator on the website of different Banks and NBFCs. You can check out the latest offers on loans and different services on the Buddy Loan website.

Do not forget to include your credit report in your pocket while making these decisions. Low credit score loans can be hectic to deal with.

Q. How can I improve my bad credit score?
A.
A high credit score is a plus point for everyone who prefers loans and credit cards. Particular things could lower your credit score if you don’t maintain it properly. With low credit, score loans become a hard task to achieve.

Maintain your credit utilization ratio below 30%. By avoiding unnecessary expenses, you can save yourself from the struggles of monthly dues. Because one missed due can create havoc in your credit history.

Only when you need extra financial support, then only go for a loan. Likewise, multiple loans from different lenders will negatively impact your credit score. Because whenever you apply for a loan, the lender will make a hard inquiry over your credit to decide your eligibility. So with more loans, more hard inquiries will follow, which is unsuitable for your credit score.

Most importantly, if you opt for a loan and cannot repay them properly on time, it will eventually lower your credit score. A bounced check can significantly impact your credit score. A low credit score loan will become a more tricky thing to handle, especially if you plan for long-term loans.

Healthy finance practices can help you maintain your credit limit in the longer run, but certain practices can ruin your credit score, leaving you in a risky situation, where you cannot apply for loans and credit card facilities. Low credit score loans can be available if you look out for them properly and make choices that best suit you.