Getting a personal loan with a bad credit score is often an issue difficult to figure out. A lender considers your credit score history before offering you a personal loan. This is why a bad credit score negatively impacts your chances of getting a personal loan. To know everything about how to get a personal loan with a bad credit score, keep reading.
When you require funds to smoothly run your life, personal loans prove to be of great help. But, before having your personal loan application approved, one has to undergo several checks from the end of the loan lender.
Table of Contents
What is Personal Loan and its types?
A personal loan is an unsecured loan that individuals take from either a bank or a non-banking financial company (NBFC). Personal loans are taken to meet personal requirements. One needs to fulfill personal loan eligibility criteria to seek a personal loan. Some of such criteria include income, employment history, credit, repayment capacity, etc.
Types of Personal Loans and how are they used
The following list features the various kinds of personal loans and their uses:
Weddings in India are important events. They bring loads of expenses along. Various lenders offer personal loans for weddings such that extreme expenses can be taken care of. Wedding loans can be taken by the bride, groom, or any other family member of either. The loan amount can be customized as per personal requirements.
Travel loans are for people who love traveling. Such loans are called vacation loans or travel loans. Such loans help people to travel and pay the expenditure using the loan. Such loans often come with travel insurance.
Home Renovation Loan
Home loans are common, but these days’ people also take loans to renovate their homes.
Pension loans are for retired individuals. In such loans, the general personal loan eligibility criteria do not apply. In the case of a pension loan, pension proof calculated as per the personal loan calculator is required to be submitted.
Education loan is a very common kind of personal loan. Mostly, parents’ sign up for this loan, and later the kids take over the responsibility to pay it off. People also use education loans to pay big academic fees for their kids.
Festival loans help people pay for hosting grand parties and celebrating festivities. This is a new and unique kind of personal loan.
Mobile Loans or Computer Loans
Computer and mobile loans are taken to buy expensive electronic gadgets for personal use. Such loans often come with insurance.
Why a personal loan with a bad credit score is difficult?
A credit score depicts the creditworthiness of a person. It is a 3 digit numeric value. The credit score is processed by the Credit Bureaus using the monetary data provided to them by the leading banks, non-banking financial companies, and governmental organizations.
It is difficult to get a personal loan with a bad credit score. However, a low credit score does not mean that one is not eligible to avail of a personal loan. The process of approval just gets a little difficult.
Individuals with a low credit score require more effort to have their loan approved. A personal loan with a bad credit score generally comes with a higher rate of interest. Almost every loan lender organization checks the credit score before making a decision. Hence, maintaining a good credit score is an essential factor to easily get a personal loan.
Why personal loan interest rates are high?
Personal loan interest rates are higher than other loans like car loans and home loans in India. It is so because personal loans are unsecured debts. They do not ask for any asset submission or collateral submissions. The personal loan interest rates in India range between 11% to 35%.
Personal loan documents
Some essential personal loan documents are required when applying for a personal loan. The list includes the following documents:
- KYC documentation including Aadhaar card, voter ID card, driving license, and others.
- The bank account statements of your current account (for self-employed) or salary account (for salaried individuals) for the last six months.
- The salary slips (this goes for salaried employees) or income proof (this goes for self-employed) for the last three months.
Furthermore, depending upon the policy of the lender and the personal profile of the loan seeker, the documents requested may vary. One might require submitting some additional documents.
Can we get a second chance personal loan with bad credits?
One can avail of online loans for bad credit scores. The bad credit loans monthly payments are higher than what the lender usually charges. There might be complications in getting the loan when you feature a bad credit score, but one can surely get a second chance.
How to improve bad credits quickly?
A bad credit score can be improved by following some basic strategies. The following are some of such strategies that can help you improve your bad credit score and avail of a personal loan.
Dispute inaccuracies on the credit report
You must check the credit report and spot the inaccuracies. Any false data on your credit report can push your credit score down. Make sure to verify the listed accounts on your credit report. In case, you spot any mistakes, inform and dispute the data and have it rectified as soon as possible before any damage is done.
Applying for too much new credit can result in various inquiries
Having a new credit card can enhance your credit limit, but when you apply for a new credit card, you create a hard inquiry scenario on the credit report. A lot of hard inquiries can lead to creating a negative impact on your overall credit score. However, this effect eventually fades off. The hard inquiries on your credit score last for two years.
Do not shut unused credit cards
Shutting an account can raise the credit utilization ratio. Having an unused credit card open when it does not cost you any annual fee is a good strategy. Having some accounts open while owing the same amount can help you have improved credit scores.
Open and apply for new credit accounts only when they are needed
Opening accounts to create an enhanced credit mix is not a good strategy. This does not improve your credit score. Owning unrequired credit can harm your credit score in several ways. It can create several hard inquiries that would further tamper your credit score.
Pay off your bills on time
When a lender reviews your credit score, they check how reliable you are to pay your bills. Good payment performance is a predictor of a good future. By paying your bills in time, you can create a positive influence. Paying bills late or having an account settled for less will only spoil your credit score. In case you are running behind for any payment, make sure to pay and clear them off as soon as possible. Clear the current bills first followed by the old ones. Older payments are less impactful than recent ones.
Pay your utility bills and phone bills on time and earn credit
Paying utility bills and phone bills on time and positively impact your credit score.
Always pay your debts and maintain a low balance on your credit cards
To maintain a good credit utilization ratio is an essential number when a credit score is calculated. It is evaluated by summing up the balance of all your credit cards and dividing it by the total credit score. The credit utilization ratio can be positively influenced by the following:
- keeping low credit card balance
- paying your debts off in time
- being an unauthorized user on another account of another person
Are there any personal loans for bankrupts?
Technically, one can get a second chance personal loan with bad credits even after bankruptcy. But, one has to wait for a short while such that the bankruptcy ages and the credit score improve. Once the numbers get a little better, you can get a personal loan in India with reasonable terms and conditions.
Why choose us as a personal loan channel partner?
If you are looking forward to getting an instant personal loan in Bangalore and desire a reliable source, you can consider artofloans.com as your personal loan channel partner. With an experience of over eight years in the field, we are proud to have served ample happy customers. We charge zero processing fees and believe in offering a transparent process to our customers.
We assign a dedicated relationship manager to guide and help our clients in the best way possible till the disbursement of the loan. Moreover, you can apply and avail yourself of personal loans online without any hassles.