Can You Get A Loan With A Bad Credit Score?

Financial institutions, lenders, and loan providers analyse a borrower’s creditworthiness with the help of a credit score. If you have a credit score of 750 or above, you may find it easy in getting loans approved. Timely payments are not always possible, with credit card interest accruing every month.

Only if you have the needed money management skills, consistent cash flow, and discipline to repay on time. Surprisingly, under certain circumstances, a borrower with a low credit score can also get loans approved. For an individual or organisation borrowing funds from a bank or any other medium, work on improving credit score for favourable credit terms.

Loans are a big step and may often lead to bankruptcy because loans require a mortgage in certain cases. The loan should be an option when no other credit facility is at the help. A loan from a finance financial institution is the same as walking into the sea, knowing there are sharks.

Reasons For Low Credit Score

It may surprise you to learn that a large sector of people with poor credit history also benefits from borrowing loans. However, it is obvious for the lender to be hesitant while allowing people with low credit scores a huge sum of money. A poor credit score directly implies a risk of default. A poor credit score is a clear indication of the low repayment capacity of individuals, and therefore lenders find it a challenge to offer loans under low credit scores.

• Failure of a credit application
• No loan is taken before and therefore no financial track record.
• Bills not paid on time
• Repayment not done on time
• Borrowed loan in the past and timely repayment have not been met.

A bad credit loan is an opportunity for individuals who have low or no credit score. It is a type of secured loan where collateral security such as gold, or property, is mortgaged for or the amount so borrowed.

Ways To Get A Loan With Poor Credit Score

1. Avail The Option Of A Secured Loan

If you have not met the criteria of securing a personal loan, a credit loan, or any type of financial borrowing to meet your current requirement - secured loans are a great option. The risk of low credit is less because it is backed by adequate collateral with enough liquidity as such credit score gets less important while approving secured loans.

The most recommended type of secured loans includes gold loan, loan against security, and loan against property. However do not recklessly opt for a collateral loan, as any failure to repay may not get you the collateral back. Opt for secured loans only in the hour of urgency.

2. Look For A Better Prospect

The cut-off for individual credit scores varies from lender to lender, in the same way as poor credit history varies from borrower to borrower. Some lenders provide a capping of high cutoff in credit scores while approving loan applications, while others may have low credit score but comparatively higher interest rates.

Ensure to have the proper research done and choose the appropriate prospect. If you are an applicant with low credit history, widen your scope of the search and look for lenders who offer loans with low credit scores. Today, the internet is flooded with information, where online financial marketplaces provide ample data required.

3. Take The Help Of A Guarantor

One way to get a loan with a poor credit score is to opt for a joint loan. You can look for someone ready to collaborate with you, probably your spouse or a family member who has a good credit history. The chance of getting the loans to approve increases as the partner acts as a co-applicant with the borrower.

If you have a poor credit score, a guarantor can be a boon and increase the chances of eligibility. Of course, the guarantor should have a good credit history to eliminate chances of rejection. An important aspect to keep in mind is that the credit risk extends to the guarantor. The guarantor becomes liable for loan repayment in case of default by the primary borrower.

4. Correct Mistakes In Your Credit Report

It is not uncommon for the CIBIL report to contain errors. It is obvious to have errors in case the report is not updated against the correct payment record. As such, the errors can take a toll on the credit score without the fault of the borrower. There are various websites to check the CIBIL report for free, and you can choose to run a quick check using them. Boost your credit score and help your application get through.

5. Request For NA Or NH In Credit Report

Surprisingly bad credit loan eligibility passes through loopholes. One such loophole is NA or NH in the credit report. When the lender marks NA or NH, in the credit report, it indicates the absence of previous credit activity in the last 36 months.

As such, you may not have a credit score at all in the CIBIL report. You can take the absence of credit activity and speak to the lender of your inactive history. However, there might be a chance that the lender approves the loan with a higher interest rate. When you opt for a bad credit loan, make sure you have sufficient funds to repay. If not, you may plummet to a situation worse than before.

6. Prove That You Can Repay The EMI

Lenders may agree to offer credit despite a bad credit score. If you can, in any way, prove that you are capable of repaying the interest further, you can do so by disclosing your earning capacity. Communicate to the lender that your earnings have considerably increased, and you can afford to pay the EMI. Your chances of getting the loan may increase.

Apply For A Bad Credit Loan

When no other option helps with financial assistance, with poor credit history, bad credit loans are a great escape. Opt for bad credit loans under the following circumstances:

• Previous default on credit card payments
• The financial situation improved, and you can repay the credit loan to improve the credit score.
• Several lenders have rejected your loan application due to low credit rating.
• A bad credit loan is the only way to manage current debts.

How To Improve Your Credit Score

If you are looking to improve your credit score, the below points may help you get an advantage over time.

• Outstanding balances on your credit should be paid off within the time. Paying off credit card bills every time increase a credit score
• Spend less on credit cards, as such; you will not be liable to pay
• Never cancel your credit cards. Cancelling credit cards leads to the option for a reduction in total available credit which is also seen as a part of a bad credit score.
• If you have faced multiple rejections at the same time, do not keep on applying for loans. Instead, take some time to apply for the next one. Too many rejections make you seem credit hungry, and the credit scores take a big hit.

Choose A Lender When You Have a Bad Credit Score

Before you avail of a bad credit loan, make sure you have proper research on the benefits offered by various lenders. Your eligibility should meet the requirements of the lenders and eliminate chances of rejection. Rejection of a bad credit loan also damages the credit score. Read the terms and conditions of each of the lenders carefully so that you have no surprises left to deal with later. Try approaching a lender after evaluating your payment capacity.

Besides knowing your repayment capacity, check the lending capacity of the lender. Credibility and lending capacity are the two main aspects to check before approaching an organisation or individual for a credit loan. It is easy to fall prey to scammers who take your data and never disburse the loan. If you find a lender agreeing on all your terms and conditions, it indicates something suspicious. A long period amounts to a significant difference.

Also Read:

1) How to Prepare Your Business for Tax Season?
2) How To Reduce Your Taxable Income?
3) What Kind of Benefits do We Get by Paying Taxes in India?
4) What Is Lower Tax Deduction Certificate?
5) How are the mutual funds taxed in India?