In the modern world, taking a personal loan may be the only option to overcome urgent financial obligations. If your credit score is low, then it would be challenging to get approval from conventional lenders like banks or financial institutions.
Your credit score primarily defines your loan-eligibility status in India. Scores under 600 are mostly referred to as bad or poor scores, but for scores that have reached 750 and beyond, they are labelled good. Here we will guide you on how it is possible to receive a personal loan in India with a bad credit score.
Make sure you check your credit score before applying for the loan. If you know your credit score, you will better understand your financial condition and you will be able to find what concerns might affect your chances of getting accepted.
There are specific financial institutions in India that provide loans to those with a bad credit history. These financial institutions may charge higher interest to balance the risks but are not strict about credit scores.
If your credit score is poor, a secured personal loan is an excellent option. Here, you pledge some asset as security to the lender, like a vehicle, real estate, or fixed deposit. However, you may risk losing the collateral if you do not pay off the loan.
If you have a co-applicant or guarantor, a good credit score would improve your chances of loan approval. Here, the guarantor or co-applicant will assume responsibility to pay back the loan if you do not pay back.
Increasing your credit score is one of the best methods to get better loan terms down the road, but it takes time. Here's how to raise your credit score:
Lenders want to ensure you can make the loan payments on schedule. Therefore, include documentation of your consistent and dependable income in this section, such as your pay stubs, bank statements, or income tax returns.
In general, there are smaller sums of money taken and shorter repaying periods under short-term loans. Since lenders are exposed to less financial risk, they may lend more readily short-term loans with bad credit risks.
Some of the lenders provide flexible loan conditions, including cheaper EMIs or postponed payments, which help you manage the repayments better, especially in case of low credit score. Be very particular about the conditions and try to understand what is not stated.
In conclusion, even if you have bad credit, you can easily apply for a personal loan in India. It would require some effort and planning. Remember that taking out a loan with bad credit may attract harder terms and, consequently, higher interest rates. So, before you sign that contract, make sure you know all the terms of the loan.
(Note: Raising a loan comes with its own risks. So, due caution is advised)
Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.