When you apply for a loan, your credit score becomes an important factor in approval. This score is a summary of your past loans and credit, repayment history, and other factors; lenders use it to determine your repayment capacity. Since a personal loan is an unsecured finance option, assessing your credit rating becomes even more important for lenders to understand the level of risk involved in offering credit. A good credit score, then, is essential for a smooth loan approval process.
But what if you don’t have a high credit score? Does a low credit rating mean you can’t get a loan at all? Well, the answer is no. Despite a poor score, you can still get a personal loan by taking a few measures.
Take a look at how you can get a personal loan with bad credit.
1. Opt for a lower loan amount
Applying for a high loan amount with a poor credit score can affect your chances of approval. The higher the amount you apply for, the riskier you appear to the lender. Consider applying for a lower loan amount if you meet other eligibility criteria. The lender might be willing to offer you a lower amount. What’s more, this will also make repayment easier for you.
2. Prove your affordability
Another way to get a low credit score personal loanis by proving your financial capability to the lender. If you have received a salary hike recently or have an additional source of income, the lender may consider your application despite a low score. You can offer evidence of a stable job and income source, which can increase the likelihood of loan approval as it indicates higher repayment capacity. However, you may have to pay a higher rate of interest on the loan.
Additional Read – Tips to Get a Personal Loan When You Don’t Have Credit History
3. Get a co-applicant
If you have a poor credit score, you can also consider applying for a loan with a co-applicant or a guarantor. You can apply for a joint loan with your spouse, close relative, or a friend with a healthy credit score, thus leveraging their score for approval. Moreover, with the permission of your guarantor or co-applicant, you need to provide a few signatures and fulfill KYC formalities for the loan. Getting a co-applicant is more likely to increase your chances of loan approval and can even fetch you affordable personal loan interest rates.
4. Pledge a collateral
While personal loans are an unsecured form of finance, you can still check if there is a provision for collateral. You can ask your lender and consider pledging security against your loan to improve your loan application. The lender might re-consider and offer personal loans for low CIBIL scoreif you can offer collateral as a security.
5. Request for consideration with an NA or NH on your credit report
If you haven’t taken credit in the last 36 months or have an inactive credit report, it is marked with an NA or NH sign. This can indicate either no credit score or can lower your existing credit rating. In such a situation, you can speak to your lender and request them to consider your case. The lender might approve your loan at a higher rate of interest.
Additional Read – Tips to Improve Personal Loan Application
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