How to get a loan if you have bad credit score?
Accessing a credit, like a credit card or a loan, has become increasingly complex with time. Moreover, the banks have upped the bar as far as lending criteria is concerned owing to the ongoing financial duress.
Getting loans if you have poor credit is an uphill task. However, it is not very difficult to find a lender, although many lenders have imposed restrictions on granting loans amid the caprices of recession. Check your credit report regularly to know your credit score. Each financial institution has its protocols for evaluating credit. Hence, the parameters of credit evaluation may vary from one lender to the other.
You can check your personal credit score through your bank or credit card issuer’s online portal or buy a premium access service from a credit organisation.
11 ways to get loans with poor credit score:
1. Contact your current bank:
In all probability, your interests will be catered to if you have a long-standing alliance with a particular financial institution. Hence, it is worth trying to capitalise on that equation to gain a loan, even with poor credit.
Doing so might help you form an idea of which loans you might qualify for. You can use this information as a reference point to compare the rates offered by other financial institutions.
2. Evidence of secure income:
A lender may consider your application for a loan if you can prove that you have gained a salary increment. Even showing records of a different source will suffice for applying for the loan. These may work in your favour, and your lender is most likely to approve of your loan application despite a poor credit score.
However, you may incur much higher interest rates when you prove that you are eligible to secure your loan in this manner.
3. Appeal for a lower loan amount:
Asking for an exorbitant amount despite having a low credit score suggests increased risks to the lender.
You may run the risk of defaulting if you are applying for a higher amount of loan. A lender feels more assured if you apply for a lower amount, as it is always feasible to repay a lower amount.
4. Apply for a secured loan:
You can apply for a loan against some collateral such as gold or immovable assets. Several financial institutions disburse loans to applicants with low credit scores in lieu of a mortgage.
Banks readily accept resources such as gold, property, fixed deposits etc as collateral to provide a secured loan even to those applying with a low credit score.
5. Secure a guarantor:
If you can manage to rope in a co-applicant or a guarantor when applying for a personal loan, your loan will get sanctioned even if you have a low credit score.
Moreover, if the concerned bank finds the credit score or the guarantor’s income or the co-applicant to be satisfactory, they will likely grant you a loan without any ado.
6. Rectify errors in CIBIL score:
Your CIBIL report may contain errors. This usually happens when your records have not yet been updated. Flaws as such can affect your credit score for no mistake of yours.
So, make it a point to go through your CIBIL report for free regularly and rectify the mistakes. Doing so will enhance your credit scores and improve your chances of getting the loan approved.
7. Convince your lender for a loan in case of credit inactivity:
On your credit report, the NA or NH signifies the lack of any past credit activity in the past 36 months. In such circumstances, the credit score in your CIBIL report is nil. So, you may discuss with the concerned bank officials regarding your credit inaction.
The lender is likely to offer you this loan at somewhat higher rates of interest.
8. Take help of Credit Unions:
Smaller organisations such as credit unions have simple membership requirements, primarily based on your employer, location, or other factors. Availing of their services are a viable alternative to the predatory title or payday loan lenders.
Credit Unions are most likely to come to your aid to help you find a product that suits your needs.
9. Peer-to-peer lending:
Peer-to-peer lending is a possible way to get a loan if you have a low credit score. This type of transaction is quite different from traditional loans. In this type of lending, you can avail of an online service like that of a Lending Club to get in touch with investors intending to loan money to borrowers.
Peer-to-peer lending helps you to obtain a loan within a short period. This sort of lending may help you rake in more excellent interest rates than a bank loan, even with poor credit. Nevertheless, the clauses of loan approval are still governed by your past credit records. You may need to come through a credit check to procure the loan.
Usually, peer-to-peer lenders report to the credit authorities, but a twofold check of the loan terms can work on enhancing your credit rating while making timely payments each month.
10. Alternative payday loans:
Credit unions provide Payday Alternative Loans (PAL). These are smaller loans with tenure between one to six months. PAL can be a flexible option if you have a constructive plan to pay off your debts.
To avoid escalating interest rates and never-ending debt cycles with payday loans, lenders look out for PALs as they are more feasible to deal in than payday loans. You can get bad credit payday loans to simplify the matter.
11. Opt for credit-builder loans:
Credit-builder loans can come in handy to develop a strong credit history. In this case, you do not receive the loan money in hand. All you need to do is deciding a tenure during which you can repay the loan in periodic instalments.
The lender sends your payment records to the credit bureaus. Every month, this money will be credited to your account, which can be accessed on the expiry of your loan’s term.
Conclusion:
You can encash on poor credit, too, if you take time to mull over your overall financial circumstances. Plan a budget you can manage for the long term. Monitor your debt balances systematically.
Keeping in mind today’s uncertain situations, make sure that your urgent needs drive the loan you are planning. In short, develop a strategy. Take care of these factors, and your financial health will stay robust for a long time.