A credit score is a crucial factor that banks and money lenders check before approving a loan to borrowers. This 3-digital number is calculated based on several elements and helps lenders assess the creditworthiness of a borrower. The score can range anywhere from 300-900, representing the financial standing of a person. Any score above 750 is good, anything between 550 to 750 is average, and if it goes below 550, it is considered a poor credit score.
Needless to say that seeking a personal loan with a good credit score is as easy as a pie. The issue is when you have a low credit score. Well, the good news is that you can apply for a loan from online or traditional lenders even with a poor score. However, your options for interest and the cost of fees may vary based on where your credit falls.
Read this article to understand how you can get a loan easily with your not-so-perfect score:
Prove Your Capability to Pay Regular EMI’s
The next thing that banks or lenders evaluate after the credit score is your income. Hence, you need to communicate to them that you have a stable income and can pay regular EMIs. If you have recently received a hike or have multiple sources of income, it can work in your favour. You need to provide proof of your eligibility and steady job to convince the lender. This can increase the chances of your loan approval.
Ask for a Small Loan from Lenders
If you want a personal loan with a poor credit score, then ask for a low loan amount. Lenders will be more comfortable and convinced to grant you as it’s easier to repay. Asking for a higher amount despite a low score indicates borrowers default on repayment and higher risks.
Involve a Co-signer or Guarantor
You can also avail a quick private loan by securing a guarantor or involving a co-signer who has a high score. Of course, you will need to inform them earlier as they have to complete KYC formalities along with providing signatures for the application. When you apply with a co-signer who has steady income or good credit score, lenders are more likely to grant you a loan as it gives them the confidence that you will repay the amount.
Correct Your Credit Report Mistakes
As times, there are mistakes on your credit report, especially when a detail is missing or the latest information is not updated. Even though it’s not your fault, it can lead to poor score and affect credit possibilities. So, make sure to check your report online regularly and make corrections when needed.
You may have a poor credit score but can still apply and get approval for a personal loan by pledging collateral. To explain in simple words, collateral is similar to a guarantor but works as an asset that is attached with a loan. If you fail to repay the loan amount on time, the lender has the right to sell this collateral to compensate for the unpaid amount.
The most common question among borrowers is “How can I get a personal loan with poor credit?” Well, here you go. You have all the solutions that you need to seek loans despite your low CIBIL score. These methods are helpful to avail the loan but make sure that you have enough funds to repay or your score can plummet further. Moreover, prefer improving your credit score over time and then apply for the loan to avoid any hassle or rejection.
Shashank Modi is a content marketer who works at KreditBee – one of the India’s leading private loan providers for salaried and self-employed individuals. Shashank writes to empower his readers so they can take control of their finances and live their lives without worrying about money constantly. His ultimate goal is to write a book to teach kids about finance and budgeting.