Five ways to get loans despite low credit score
Even if you have a lower credit score, you can avail loans albeit at a higher interest rate. It is therefore in the interest of consumers to maintain a healthy credit profile.
New Delhi: For a generation which does not believe much in savings and instead relies on EMIs for almost everything maintaining a good credit score should be sacrosanct.
It is one of the most important metrics lenders use to evaluate whether a potential borrower will get a loan or not. A score above 750 credit score is considered good enough for getting loans approved. However, maintaining a good credit score is of utmost importance and requires discipline in timely payment of dues among other factors.
A credit score is a measure of an individual’s ability to pay back the borrowed amount. It is the numerical representation of their creditworthiness. A credit score is a 3 digit number that falls in the range of 300-900, 900 being the highest. You should always work towards reaching a credit score that is close to 900, as per Bankbazaar.
However, even if you have a lower credit score, you can avail loans albeit at a higher interest rate. It is therefore in the interest of consumers to maintain a healthy credit profile.
Here are a few ways you can get a loan despite low credit score
Widen your horizon
While most lenders only lend to consumers who have a high credit score there are some which may sanction a loan even if the user’s credit profile is not robust but such loans come at higher interest rates.
Online portals are a good way to search for potential lenders who might approve loans to those with lower scores. In such a scenario, the borrower’s profile, job, income and location play a crucial role in getting an offer from a lender.
Talk to lenders
Past associations help. Experts say if a borrower has a low credit score due to genuine financial hardship in the past, it can be discussed with the financial institution where one holds their salary account or has a long association with. This might help one to get better loan terms especially if there has been an improvement in salary recently.
If one is denied unsecured loans such as personal loans and credit card loans or charged with very high interest rates, there is the option of secured loans. Borrowers can take loans which are backed by collateral such as gold, property or securities. Such loans make the lender more comfortable in sanctioning loans.
Get a guarantor
A joint loan can help override low credit score in front of lenders. A borrower can co-opt for a loan with someone who has a good credit profile like a spouse or any family member. This increases the chances of someone who has a low credit score to get loans easily.
NBFCs, peer-to-peer lenders instead of banks
It’s a known fact that even loan enquiries get recorded against your credit profile and it’s therefore advisable not to approach banks for loans in case your credit profile is already low. Banks carry out thorough checks on loan applicants which can turn to be detrimental. In such a scenario, it is better if one approaches an NBFCs for loan which have more relaxed lending norms but charge lot more than banks. There is also the option of peer-to-peer lenders but at a higher cost.