Credit Score is first priority before taking any loan. Your credit score, as you may be aware, reveals your trustworthiness and influences the type of loan you are qualified for.
Banks and NBFCs depend heavily on a credit score to accept or reject a loan, particularly a personal loan because it demonstrates your capacity to repay the debt.
Some important tips to get a personal loan with a low credit score.
What is Credit Score?
The credit score is a three-digit figure that varies from 300 to 900 and represents a person’s ability to repay a debt. Your credit score is one of several elements that banks and NBFCs evaluate when accepting or rejecting your loan application since it informs lenders about your creditworthiness.
Banks and NBFCs will be more interested in issuing you a loan if your credit score is greater, as a higher credit score implies a lesser risk of loan default. As a result, a better credit score increases your chances of securing a loan, whereas a lower credit score decreases your chances.
Also Read: 8 ways to increase Cibil Score
Get a Personal Loan with a Low Credit Score
Show Extra Income:
If your credit score is low, you will be required to present proof of additional income to the lender. Apart from your primary source of income, you will be needed to show documentation of any additional money you may be generating via a side business or rental property. Similarly, you can produce proof of your higher income from your major source of income, such as an increment, the most recent raised ITR, and so on.
Even if you have a low credit score or are new to credit, the lender may accept your personal loan application if you have enough monthly flexible income to cover your personal loan EMIs on time.
Also Read: 5 reason you should apply for loan
Apply Loan with Co-applicant:
Assume you have no additional income and want a larger loan amount, which you are unable to obtain owing to a bad credit score. You might hunt for a co-applicant or guarantor with a decent to exceptional credit score in this situation.
Having a working family member as a co-applicant on a personal loan application lowers the lender’s credit risk.
Apply Loan From NBFC:
Most NBFCs and digitally-enabled lenders provide personal loans to those with bad credit, but at higher rates than banks and larger NBFCs.
When you apply for a loan through an NBFC, you have a better chance of getting a personal loan with a bad credit score.
Consider the bank’s connection with your employer:
Many who work for trustworthy companies or government agencies have a better level of financial security than others. As a result, lenders may approve personal loan applications from such candidates based on their EMI repayment capability, employment stability, and company reputation.
How to Improve Credit Score
Avoid missing EMI payments and pay off your debts on schedule. If you skip an EMI payment, you will be charged a penalty and your CIBIL score will drop.
Assure you just take out a few loans over a set length of time. When you request credit repeatedly over a short period of time, the number of credit inquiries filed against you rises, lowering your credit score.
When it comes to repaying your loan, consider terms that are suitable for you. You’ll be able to pay your EMIs on time this way. Your CIBIL score will steadily improve if you do not postpone EMI payments.
Verify your CIBIL report on a regular basis and fix any errors you see.