Easy and Effective Ways to Get a Loan with Bad Credit Score |
Posted: June 29, 2017 |
When life throws an unexpected curveball, we all need help. There are times when our emergency funds are not enough to tackle a financial crisis and taking a loan is the only option available. Thanks to the latest schemes, lending money from a bank has become extremely easy and instant. However, this is only if your credit score is high, say more than 750. But what if your credit score is not up to the mark and you are in urgent need of cash? Here’s what you can do! Know the Reason of Low Credit Score If the score is low because of less loan amount was taken or because your credit history is relatively recent there are chances that you might get a loan. But if your score is low because of late payment history or credit default, then the chance of getting a loan from the bank decreases. However, you can try and explain the reason behind the low score like you lost your job or there was a financial emergency. In the case of genuine reasons, banks might give you a benefit of doubt and approve your loan application. Don’t Lose Hope Reserve Bank of India has made it mandatory for loan lenders to check the CIBIL score of any individual who has applied for a loan. If your credit score is below 750, then there are high chances that the bank won't approve your application. However in case you have not applied for a loan recently, then you can give it a try. CIBIL data also shows that 80% of the approved loan application has a credit score of 750 or above. However, this is not the only parameter that lenders look at for. Your Income and Employer Can Help A few months back, banks had started approving a loan of more than 1 crore for 30 years tenure for young salaried individuals with high earning potentials. This means, if you have a stable income source and you are working with a brand or say a MNC, then the banks might overlook your low credit score and approve your loan. However in such cases, the rate of interest is higher. Try to Cut the Deal Other than loan approval, credit score also plays an important role in deciding the interest rate. The rate of interest depends upon the type of loan, debt amount and the payback tenure. The rates of secured loans like home loan or loan against property vary from 12% - 18%. In case of an unsecured loan, it can jump up to 18%-26%. Go to NBFC We would suggest skipping going to the bank if you have a credit score of less than 600 and the fault is yours. In such scenarios, NBFC or Non-Banking Financial Institutions can help you. They are more flexible and might overlook your credit defaults. However, they charge a huge interest as compared to banks. Use Your Assets as Collateral Your fixed deposits or opted insurance scheme can help you get a loan at relatively lower rates. However, the loan amount is not huge. Usually, you can get a loan of 70-80% of the insurance or fixed deposit amount. Peer-To-Peer Lending Websites In case you need low amount, then this is a good option. You can get a small loan of upto Rs. 5 lakh at an interest rate of 12-24% for 1-3 years tenure. This platform will check your assess banking, social behavior, current repayments, family details and job stability. Not In a Hurry? Wait For 6-7 Months In case you can, wait for few months and improve your credit score. It will save you from all the stress. To improve the score, pay your credit bills on time. You can also get secured credit card against deposit and use it wisely. Once you start these practices, your credit score will gradually improve. Check Before It’s Too Late Instead of knowing about your credit defaults at the last time of applying for a loan, it is advisable to check your credit score and report beforehand. Online financial marketplaces like Paisabazaar offer free credit report with monthly updates right in your inbox. By doing this, you can keep a check on your credit history and improve it, in case the score is low.
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