How can I get a personal loan if I have a bad credit score?

Personal Loan  Updated date : January 6, 2018 81

A personal loan is also called an unsecured loan. It is different from credit card for its lower interest rates. For personal loan, you are allowed to borrow a fixed amount in a fixed term at a fixed rate of interest. Each bank may have its maximum amount for a personal loan. Over this amount, you are required to put up an asset as security. Generally speaking, the bigger the loan amount you borrow, the lower rate of interest you are required to pay.

You can still get a personal loan even if you have a bad credit score. A poor credit score makes you a high risk customer to major banks, NBFCs. Unless the lenders are relying on credit score, you will get a loan. The interest rates will be a little higher as compared to others.

You can get a personal loan even if you have a bad credit score if you fit into the following conditions -

1. Use the Collateral to avail the loan:-

As stated above, the lenders always seek of assurance in terms of repayment of the loans. When you hold a bad credit score, such assurance is not provided to the lender. In such tricky situation, the person can provide the assets, such as “Car” or “House” as collateral against the amount which is to be availed. Such collateral can improve the interest of the lenders to provide you loan and they approve your loan almost instantly.

You can, even use the Fixed Deposits, PF, insurances, or other securities as collateral to avail the benefits of the loan. When you put such assets as collateral, the approval of the loan gets almost ensured. Also, the money invested in such assets keep on reaping the benefits and you get the loan amount, too. The duration of the can be as long as the tenure of such assets that is for example, fixed deposit tenure. So, the person can plan the repayment schedule accordingly. Another way is to avail the loan by putting gold or silver as collateral. Such loans are provided on the lower interest rate than usual.

2. Improve your credit score to avail the loan:-

The person can improve the chances to get the loans by improving the credit scores. By doing so, you can even get the higher amount of loan with relatively lower rate of interests. If you have any pending installments or bills or any dues, you should immediately pay that off. The payments of them will contribute to increase the credit score. Another trick is to borrow small amount of money and pay it off in the short duration. You will not have to pay high interest fees for such small duration plus the repayment will increase your creditworthiness in no time. If you are looking forward to borrow a large amount of money, this strategy can be helpful to improve your credit ratings and thus, your chances to avail the loan gets higher too.

3. Borrow from local agencies:-

If you are an owner of the bad credit score, then there are high chances that traditional banks may not provide you loan. In such cases, you can avail the loan amount from other local agencies or lenders. However, there is a possibility that such lenders may charge high interest rates.

4. Borrow from credit unions:-

The credit unions are created in order to support the individuals to get the loans. These unions are created on the basis of common goal or purpose. These unions can be owned by people coming from similar geographical area or similar industry or even from the same interest. These unions are providing the loan to people at relatively lower interest rates then the market. These unions provide loan to individuals even if they hold low credit score because of their sympathetic approach.

5. Co-signer for loan:-

When you hold a low or bad credit score, the lenders will be sceptical to offer you loan. At the same time, if you bring a co-signer, who has a good financial history and can co-sign a loan with you, then the lender can approve the loan for you. The co-signer is a backup for the lender, as in case, if you are not able to repay the loan, then lender can ask for the payment from the co-signer. The co-signer should be a person, who knows you personally and has a will to co-sign a loan with you. In such cases, the main borrower has to ensure the timely repayment of the loan.

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Loan Query / Support / Feedback

    Can I get a personal loan with a CIBIL default? by Ruby Mittal:

    If you don't have right credit score, then you have some choices below -

    1) Try to explain the bank - Some times credit score is poor due to some mis informations

    I remember a customer having poor credit score , due to , some regular problem from the bank sixe in existing loan . The customer came with proofs and bank said ok

    In case you have genuine issue , then try to talk to resolve.

    2) Take from NBFC-. Banks usually are Very strict on risk management and giving loans with poor credit score .

    NBFC are pseudo banks and have very lenient credit policy. Try to connect to them. They will charge you high rate of interest , sometimes 25% - 35% but not bad , when you need money

    You can return them when your need is done.

    3) Take GOLD loan - Thats the easiest way. Go to any gold loan company like muthot finance and take short term loan against gold. Every family in india has gold in bank locker. These companies are very easy with credit score since you give gold as security. They charge low rates and flexible early payment policy.