Lenders don’t want to risk granting a loan if there is no assurance of timely repayment. So, the first thing they check before approving an unsecured loan like a small loan is your ability to repay the loan on time. Your credit history and credit score are pretty good reflections of this. In fact, having a good credit history and a high credit score (preferably over 750 points) can get you a loan easily.

But what if you don’t have a high enough credit score or a spotty credit history? In this case, securing small personal finance becomes tricky, but it is not impossible. Here are some tips to help you secure small personal finance even with bad credit.

1. Check your credit report

Sometimes, your credit report shows a low score if it isn’t updated with the latest information. So, check your credit report regularly and correct errors as you spot them. This ensures your credit information is up to date and makes getting a loan more convenient for you. An added benefit? You may even be able to negotiate for lower personal loan interest rates with a better score.

2. Prove your income can support EMI payments

Ultimately, your lenders want an assurance that you will be able to manage timely EMI payments. So, if your credit history is spotty, make up for it by showing you have a reliable source of income to support your loan repayments. Keep in mind that you might have to pay a higher interest rate to your lender this way. So, allocate sufficient funds to repayments. Need help determining how much funds you should spare for your loan? Use a personal loan EMI calculator to figure it out.

Additional Read: Improve your Credit Score with Small Personal Loan

3. Ask for a lower loan amount

If you apply for a high personal loan amount with a low credit score, the lender sees you as a high-risk borrower. The reason? From a lender’s perspective, given your low creditworthiness, you are more likely to make a loan default on loan EMIs. However, if the loan amount is smaller, lenders are more likely to approve the loan even if you have a low credit score. This is because the loan repayments will be easier; hence, the chances of defaulting will be lower.

4. Apply for a loan with a co-applicant

If all else fails, try applying for a loan with a co-applicant with a higher credit score than you. This assures the lender that even if you cannot repay the loan EMIs, your co-applicant can cover it for you. More importantly, when you apply with a co-signer, lenders consider their credit score too. This increases your loan approval chances.

Additional Read: Small Personal Loan Vs Personal Loan: What is the Difference?

Final word

While the above tips can help you secure small personal finance with a low credit score, make sure you build up your credit score to make securing your next loan easier.

Looking for a financier to help you get a small personal loan in the meantime? Turn to Tata Capital. We offer small personal finance at attractive rates and flexible terms to cover all your big-ticket purchases.

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