All You Need to Know About Personal Loan with Bad Credit

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Even though credit scores have been there for a long time, they have only recently become popular. Despite this, a huge portion of the population is unaware of credit ratings or that they have one.

When they request a personal loan with bad credit, the bank informs them that their credit score is poor and that their mortgage application has been denied.

What Happens if your Credit Score is Low?

You are a high-risk consumer if your credit score is low, and lenders are unlikely to offer you money. A credit rating is based on how well you’ve paid back previous loans, whether you’ve failed or pre-paid any debts, the secured loans you’ve taken, or how much of your income goes towards loan repayment.

If you have a terrible credit history and need a loan from a bank, you may be able to find some creditors who will give you money, but you will most likely pay a high rate of interest. Some lending organisations offer interest rates as high as 30-40% p.a., which is extraordinarily high. 

How can you Receive a Personal Loan if your CIBIL Score is Low?

You can receive a personal loan even with a poor CIBIL score, albeit it will be difficult. Many new fintech portals and non-bank financial companies (NBFCs) will provide you with credit but at a higher interest rate.

How do you Find a Lender once you Have a Low Credit Score?

Always do your homework on the lender to check whether they are reputable. Don’t fall prey to con artists who take your personal information and never payout your loan. Some con artists also might offer you favourable terms, but they will require you to pay a fee upfront. They and your money would never be seen.

Make certain you’re getting the proper interest rate. Some lenders may create a false impression by displaying their borrowing costs in months rather than years. As a result, the annual rate of 30 per cent is only 2.5 per cent every month. 

On the other hand, a typical bank will charge you roughly 14 per cent each year, or 1.66 per cent per month. When interest is calculated over a lengthy period, the difference is significant.

What can you do to Raise your Credit Score?

If you don’t need a personal loan with bad credit right now, you can concentrate on boosting your credit score right away. You will never be refused yet another loan application if you do this. Here are some suggestions to help you raise your credit score.

If you owe money on your credit and debit cards, try to pay them off as soon as possible. Always pay off credit card debts in full. You should not settle with paying merely the bare minimum.

Stop using your credit card until you’ve paid off your entire balance. After that, you must only spend as much as you can afford to repay in full each month.

You can get a secured credit card if you don’t have a credit or debit card, and no lender is prepared to provide you with one. Start a small saving account with a bank and get a credit or debit card for up to 80% of the deposit’s value. 

Use this card responsibly by only 30-40% of the authorised credit limit. Make sure you pay your payments on time and accurately. Your credit score will improve significantly.

Conclusion

Don’t use credit card cancellation as a last resort. This implies you’ll be reducing your overall credit limit, which can hurt your credit score. You can attempt moving the available credit to one account if you have numerous credit cards and want to close them all but maintain one. Only if the credentials are from the very same bank is this feasible.

Don’t continue to apply for loans only to be turned down. Too many mortgage applications may make you appear credit-hungry, lowering your credit score.

Don’t be concerned if your credit score is now low. It’s always possible to bring it back up. Maintain a credit score of at least 700 to ensure that your loan application is always accepted!

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