By Ramu Many people encounter challenges while applying for loans because of their low credit scores. Credit scores eventually reflect the repayment abilities and creditworthiness of an individual, along with influencing the perception of risk of a lender. Even though it may seem difficult to obtain a loan with a low credit score, certain lenders provide loans even to borrowers with low credit scores.
With flexible eligibility criteria and diverse loan products, you can overcome the hurdles of a low credit score. This article offers you some amazing ways and tips for securing a loan even with a low credit score.
Understanding Credit Score
A numerical representation of the creditworthiness of an individual on the basis of their credit utilisation, repayment history, and other factors in their credit report is known as a credit score. In India, Credit Information Bureau Limited (CIBIL) is the most well-recognised credit rating system. Financial institutions and banks utilise the score as a parameter to check the credit rating of an individual for loan approval.
A credit score falls between 300–900. The score is calculated on the basis of the information provided to credit rating agencies by financial institutions. This information is calculated on the basis of your overall credit profile and payment history.
Tips To Avail A Loan With A Low Credit Score
Some practical tips through which you can obtain quick loans, despite a low credit score, are given below:
- A good source of income
Lenders often check your earning potential or income when evaluating a loan application. If you prove your repayment ability with a good source of income or additional income sources, you can easily get your loan approved despite a low credit score.
- Apply with a co-applicant
If your family member or spouse holds a good credit score, consider them as a co-applicant when applying for digital loans, as it improves your loan approval chances. Their credit history helps you instantly get your loan approved, even with a low credit score.
- Higher interest rates
Certain lenders provide low-credit loans to borrowers who have low credit scores at a higher rate of interest. If you have an urgent cash requirement, this option might be suitable.
- Loan against collateral
Some lenders sanction your loans for low credit scores when you pledge collateral. Assets, including fixed deposits, shares, property or gold, can be considered as collateral to secure your loan.
- Apply for a small amount
When applying for a loan online, consider a lower amount as it minimises the risk of payment. Hence, lenders might approve low amount loans for borrowers with a low credit score.
- Enhance your credit health
Even though the tips mentioned above are helpful to get a loan with bad credit, it is crucial to enhance your credit health for the long run. Maintain timely payments of EMI, repay existing debt and pay off utility bills, to maintain your credit health and enhance your eligibility for upcoming loans.
Conclusion:
Obtaining a loan at a credit score of around 300 is quite challenging, but possible by leveraging the above-mentioned tips. Several lenders prefer loan applications with low credit scores; however, ensure to only apply for a loan with a low credit score with a genuine and trusted lender. But it is essential to constantly monitor your credit score over time and follow responsible financial habits.