Irrespective of the lending means you apply for and the lender you choose, one of the first and leading measures they check to assess your creditworthiness is your credit score. How to get a loan with a bad credit score? Owning a low bad score usually means that your application will be rejected, thus rejecting you of the chance to satisfy your financial burdens.
Tips On How To Get A Loan With A Bad Credit Score
However, times are now changing, and these days multiple lenders in India specialize in extending credit limits and personal loans even to borrowers who have a poor credit score. In today’s article, we will learn about this methodology and get a closer look at how to get a loan with a bad credit score.
Without further ado, let’s get started.
What Is Your Credit Score?
One of the first and crucial aspects you need to know as a borrower is the meaning of your credit score. Essentially, your credit score can be recognized as a digital value assigned to you by the credit rating company after analyzing several verticals regarding your debt management practices.
In India, there are three leading credit rating agencies, CIBIL, Experian, and CRIF, and all of them take into account four main factors to calculate your credit score.
- The total number of loans already have taken
- The total amount of credit already used
- The total number of timely payments already made
- The total number of late payments already made
Taking all these factors into account, you are given a credit score on a scale of 900, and usually, it is recommended that you have a minimum of 750 scores to get approved.
However, as we shared in the opening paragraph of this article, times are changing, and now from several lenders you can get a loan with a bad credit score.
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How to Get a Loan With a Bad Credit Score – Application Process
One of the most critical factors you need to think about before applying to get a loan with a bad credit score is selecting a lender who has upfront mentioned that they are willing to give loans to borrowers with low scores.
Suppose you forget to take this into account. In that case, you might apply with a lender who does not render this service and cause more harm to your credit score as they will unquestionably demand a strict inquiry from the credit rating agency.
To avoid making this mistake and ensure that your chances of approval are fair, follow the steps below.
- Go on to your preferred search engine and type out “personal loan with low credit score India.”
- You will come across a list of lenders who offer this service, and when you are going through their offerings, be mindful to notice if they have mentioned anything related to extending loans to borrowers with poor scores, along with information concerning the interest rate they charge and the available tenure on loan.
- Once you have decided on a lender whose offering matches your requirements, and they are ready to extend the loan to you, initiate the application process by first sharing your personal information such as your full name, phone number (must be linked with Aadhar Card), and email address.
- On the next screen, share your employment information, including your employment type that is salaried or self-employed, monthly take-home income, years of experience, etc.
- Once done, you will be required to upload a couple of documents onto the lender’s secured server, including your eKYC documents (Aadhar Card, PAN Card) and income information (latest salary slip, bank statement, and ITR report).
- Once you have finished the loan application, you will need to wait for the lender’s approval, and once it arrives, you can proceed to share the loan amount you require.
Documents You Will Need
As a borrower with a poor credit history, you might need to share some additional documents with the lender, and the list for the same is as follows.
- Your eKYC documents, which include your Aadhar Card and PAN Card.
- Your income information such as latest salary slip, three months bank statements, and last three years ITR return if you are a salaried employee and your income certificate, six months bank statement, and last three years ITR report if you are a self-employed professional.
- While security for the loan, you need to guarantee any asset or collateral in the form of FD, stocks, mutual fund holdings, etc.
- Your employment information (that is, organization details and or business information)
- And proof of residence in India.
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How to Increase Your Possibilities of Getting Approved
Now that you are well acquainted with the steps you need to follow to get a loan with a bad credit score, shared below are some tips you can keep in mind to increase your chances of approval.
Get a Co-Borrower
Many lenders in India actively encourage you to apply for a personal loan and a co-borrower. Both of you can take responsibility for the loan, the overall risk of the lender decreases, and your application gets approved quickly.
However, if you are planning on getting a co-borrower, ensure that they are not above the age of 57 years. They are actively earning and have a good credit rating, as all of these will positively reflect on your application.
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Apply For a Secured Loan
Along with applying with a co-borrower, another route you can choose to increase your chances of approval is applying for a secured loan. In a secured loan, you essentially need to pledge an equal value (or higher) asset with the lender, such that it can act as a security in case you default on your commitment. Applying for a secured loan immensely reduces the risk of the loan for the lender and thus is rewarding for you, with a higher approval rating, lower interest rates, and longer tenures.
Conclusion: Increase Your Credit Score With a Personal Loan
These days, as the popularity of personal loans increases, it has become increasingly more accessible to avail of them. Thus, even you also can get a loan with a bad credit score and increase your credit score over time. All you need to do is get approved for a loan and diligently pay it back on time every month, and in due time, your credit score will go up.
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