How to Get a Personal Loan With Bad Credit?

People try very hard to make sure that their credit score is impeccable. They make payments on time and try to ensure that their credit cards, loans etc. are paid off. However, life is very uncertain and things may not always be within everyone’s control. No matter how hard you try you might not be able to make all your payments on time. In the process, your credit score will be affected and you will find it a tad difficult to borrow money. There are many people who frequently struggle with their finances and do not consider the possibility of applying for a personal loan as their credit score is not as good as desired.

If you are someone who has a bad credit score, don’t be disheartened as it does not have to be the end of the world for you and you can still manage to get more credit and fulfil your dreams. There are quite a few ways through which you can actually get the required financial assistance and take care of your responsibilities. Here are a few tips that might help you to get a personal loan with a bad credit:

1. Approach your bank – Banks usually lend money to those who are more likely to pay off their debts and so the banks need to trust you before they can offer you with a loan. When you have a high score, your credit history provides the bank with an assurance that you will be making the payments on time. However, the same is not applicable if the score is bad and so it is advisable that you approach your bank i.e. the financial institutions with which you have a savings/ current account and other products. They are more likely to trust you as their loyal customer and you might even convince them to lend you money.

2. Open an FD account – Another effective way of making sure that the financial institutions are more than happy to trust you as a borrower is to open a Fixed Deposit (FD) account with them. Fixed Deposit (also known as Time Deposit) accounts allow you to deposit a given sum of money for a certain period of time. You will earn interest on the amount that you deposit and will be able to save a decent amount of money in the process. The best part about FD accounts is that they can help you to get a personal loan without a lot of hassle. There are many banks that offer personal loans against FD accounts and the loan amount can be as high as 100 percent of the deposit amount. Moreover, your credit score will not act as a hindrance in opening a new FD account.

3. Get a loan against your credit card – Even if your credit score is low, there is a possibility that you have not used your credit card to its maximum limit. In such a scenario you can apply for a loan against your credit card with your card issuer. The application process will be very simple and on approval the amount will be credited directly to your bank account within no time. Also, the loan amount can be quite high based on the available credit on your card. The interest rate charged will be quite reasonable and you will also benefit from flexible terms for paying off the loan amount. Such a loan can surely be beneficial to you if you are in need of instant cash.

4. Opt for a Peer-to-Peer loan – It is not necessary that you will only have to borrow money from traditional lenders such as banks and other financial institutions. You can also explore other avenues and approach individual lenders for something known as a peer-to-peer loan. Although it is a relatively new concept, it is fast becoming popular in places across the globe. These days, many individuals with extra cash are happy to lend money to people in need, provided the borrowers can offer references who can assure that they will pay off the loan. The interest rate charged is quite reasonable and these lenders are willing to lend money to people with bad credit as well.

5. Apply for a secured loan – If the above mentioned tips do not help you to get a personal loan, you can always opt for a secured loan by offering a collateral. You can offer a piece of property that you own, your investments and even an insurance policy as a collateral security while applying for a secured personal loan. The banks and financial institutions are more likely to lend money to you when you offer them a collateral, even if your credit score is not the best. The loan amount will depend on the value of the collateral that your provide. Moreover, the interest charged can be a tad lower than the interest charged for unsecured loans.

The above tips should help you to borrow money from a bank or financial institution in the form of a personal loan. However, they cannot guarantee that your loan application will be approved and so the best solution is to improve your credit score. Make your payments on time, consolidate your debts and take all other necessary steps that can improve your credit score and increase your chances of obtaining more credit in the future.  If you feel that you will not be able to manage your finances effectively or figure out how to improve your credit history, you can get in touch with a financial advisor who can help you in this regard.

Financial advisors, also known as financial consultants, do not charge a lot of money but they offer consultation services that can help you to manage your finances more effectively. They can assist you in figuring out ways through which you can reduce your expenses and save more money so that you can pay off your debts. Hence, they can help you in improving your credit score in the process.