One of the best and prevalent ways to solve your financial crunch is to avail of a personal loan. Most of the banks and NBFC offer personal loans at lucrative terms and with minimum eligibility requirements. The most attractive aspect of a personal loan is that you can apply online for the loan and can use the funds for any purpose or end-use.
The only hindrance in getting instant approval for a personal loan can be your low credit score. However, there are ways of getting a personal loan approved despite a low credit score.
Why is a good credit score important
Your credit score is a crucial criterion to check your eligibility for availing of a personal loan. It is a three-digit number that signifies your creditworthiness and reflects your past debt repayments and your current borrowings. The lender decides to approve or disapprove your personal loan online application based on your records as indicated by your credit score. A score of 700 or more is readily acceptable for instant approval of a personal loan.
Essential tips to get a personal loan with a low credit score
A low credit score can dampen your chances of getting a personal loan, but there are ways to overcome this glitch and avail yourself of funds.
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Show evidence of adequate income
Your income is another major factor that lenders consider for personal loan approval. A secure job with a steady income can help to diminish the negative effect of a low credit score.
Try to show the lender that your income can support the regular and timely payment of EMIs. You can also club any additional income from some other sources, such as a salary hike, a bonus, etc. to your income and can improve your chances of getting personal loan approval.
Get a Co-signer or a Guarantor
If your credit score is low, a good option is to take a co-signer or a guarantor on board. The co-signer or the joint applicant must have a good credit score and be willing to provide all the necessary documents to this effect. You can also take the help of a guarantor who can pledge the regular payment of the loan dues in case of default from your side.
Apply for a secured loan
A personal loan is generally an unsecured loan, which does not require you to pledge any security or collateral to avail it. But with a low credit score, many lenders would ask for collateral in the form of any assets for loan sanction. It is a good option as you can get funds up to 70% to 80% of your collateral asset's market value and get it back when you repay the total loan amount.
Apply for a lesser amount
You can get a positive response from the lender if the amount you apply for is less and well within your repayment capacity. This amount may be less than what you need to come out of the financial problem, but you can seek the remaining amount from other sources.
Check your credit report
Your credit report takes into account the information provided by the lender to CIBIL or other credit bureaus. There are chances of some mistakes which, if corrected, can reflect a good credit score on your name. Although a good credit score is significant in getting a personal loan, you can still get approval for it with a lower score if you keep in mind these tips at the time of loan application to get instant loan sanction.