When you apply for any loan, the initially factor a lender appears at is your credit score. Your credit score is a summary of your credit history, all debts incurred, repayment history, and potential to repay.
Madhusudan Ekambaram, Co-Founder & CEO, KreditBee and Co-Founder of FACE, says, “A credit score helps lenders determine whether lending a loan to you will be a risky proposition or not. A credit score of over 600 is usually required to qualify to get a personal loan. All lenders prefer giving personal loans to individuals with a good credit score.”
But, if you have a low credit score, here’s what you can do to get a private loan:
Prove that your earnings can assistance the EMIs: If there has been any current upward revision in your salary or have any extra earnings supply that you can prove to the lender, they might take into account your application.
Ekambaram says, “Also, one can prove that he/she has a steady job and income, lenders are likely to grant a personal loan. However, there’s a high chance that one might have to pay a higher rate of interest.”
Opt for a reduced quantity of private loans: If you do not have a great credit score, specialists say one need to opt for a tiny loan and repay it often to enhance their credit score.
Ekambaram adds, “When one applies for a lower amount, lenders may feel more comfortable approving such a loan as a lower amount is easier to repay. Throughout this process, one can gradually improve one’s creditworthiness and eventually apply for a larger loan from a bank or other financial institution.”
Pledge collateral: Those who have been denied unsecured loans (such as private loans and credit card loans), or charged exorbitant interest prices, can take into account secured loans. Experts say lenders face reduced credit danger when they make loans backed by sufficient collateral and enough liquidity. As a outcome, they location much less emphasis on credit scores when approving applications for such secured loans.
Apply for a joint loan or add guarantor: Involving a co-applicant or guarantor with a great credit score is a further way of availing of private loans if your credit score is low. Ekambaram says, “This can increase the chance of one’s personal loan getting approved.”
These actions can help in getting private loans for people today with terrible credit. However, the very best and most advisable strategy is to enhance your credit score steadily prior to applying for credit.