Low credit score? Here's How You Can Still Avail of a Personal Loanby Nisha Scott Account manager
When you apply for a loan, the lender looks at your credit score, and it is one of the criteria in deciding your loan approval. In case your credit score is low, your loan may not be approved. The credit score is a numerical value that effectively summarises your credit history, previous loans, repayment history, and your loan repayment capability.
Hence when you apply for a loan, the lender only has to look at your credit score to judge your creditworthiness. This is especially true for a personal loan. Since a personal loan is an unsecured loan, it isn't backed by any collateral or security. Apart from primary factors like age and monthly income, lenders also assess your credit score for loan processing.
Having said that, there may be a few workarounds if you're looking for a personal loan but are hampered by a low credit score. Given below are a few things that you can do to avail of a personal loan even with a bad credit score.
1. Monthly income
Your credit score shows your past repayment history. But what if those days are truly past you, and yo now have a better income or an additional source of income. This makes you a good candidate for a loan despite a bad track record. Convey this to the lender. Show them that you earn monthly income. If you have a steady and regular income, the lender will consider your application and approve the loan.
2. Borrow Lower Amounts
When you know you have a poor credit score, there is really no point in being unrealistic and applying for a huge personal loan. Opt for a smaller loan amount that the lender is more comfortable lending, and pay it back regularly. This will not only get you some part of the fund you require, but your repayment will also slowly improve your credit score. Once your score is good enough, you can eventually apply for a bigger loan if required.
3. Go for Secured Loans
If your personal loan application was rejected due to your credit score, pledge security or collateral. Secured loans are a safer bet for lenders since they're backed by collateral. Lenders do not have to rely on your credit score since they have your collateral in case there's an issue with repayment. For instance, you can pledge your property, gold or rental receipts as collateral to avail loan against property, gold loan or loan against rent receivables, respectively.
4. Get a Co-Applicant
You can also get a co-signer or co-applicant for your loan, especially one who has a good credit score. Since both of your incomes would be involved, lenders may look favourably despite you having a bad credit score.
In this way, even if you have a poor credit score, you can use the above tips to ensure that you get your loan approved. However, it is always a good idea to keep your credit score as high as possible so that when the need for a loan arises, you don't face any problems. If your credit score is poor, make it a priority to improve it by paying your credit card bills and EMis on time.
Created on Aug 20th 2021 02:26. Viewed 295 times.