Personal loans are currently an effective way to deal with any emergency or sudden incoming expenses. But the credit score plays an important role during its approval. Those with better credit scores often get approval soon, while the chances of rejecting applications increase due to low score. However, this does not mean that people with low scores cannot take loans. Whether you want to resort to ultranective lenders, to improve your financial profile or choose a correct type of loan, there are some measures that can help you in this situation. But first of all, we understand what is a credit score and why it is important for you.
Understand credit score range
In an easy language, the credit score is a three digit number, which suggests how reliable you are in terms of borrowing. Four agencies in India release credit scores. These include Transunion Cibil, Experian, Equifax and Crif High Mark. The credit score is between 300 and 900 and it indicates your financial habits.
Less than 600: Very poor score, which is very less likely to get a loan.
600-649: It comes in a bad category, where the possibility of loan approval is less.
650-699: A satisfactory score, a loan can be found but not a sure thing.
700-749: This is a good score, which the lenders give a lot of attention.
Above 750: It is considered a very good score and the chances of getting a loan at better interest rates increases significantly.
Note that different credit bureau scores can be classified differently.
Measures to take personal loan on low credit score
Taking a personal loan with a low credit score can be challenging, but by adopting some measures you can increase its chances:
Choose a loan of low amount: If the score is low, apply for a small amount. In such cases, lenders are more comfortable in giving loans.
Show financial stability: If you are able to prove your income and stability of employment, then you can win the trust of lender. Things like salary slips, bank statement and ITR can help in this.
Add coal-applicant or guarantor: Make someone a co-applicant whose credit score is good. This not only increases the chances of getting a loan, but can also get a better interest rate.
Offer security (mortgage): Personal loans are unsecured, but some lender allows you to give collateral. If you have property, jewelery or savings, then you can get a loan by mortgaging them.
How to improve credit score
Loan can be found on low score, but the solution in long-term is to improve your credit score. These measures for this can prove to be effective:
Check credit report: If there is any mistake in your report, then improve it immediately.
Pay on time: Pay EMI of loan and credit cards on time. This will improve your credit history.
Keep credit use low: According to experts, use less than 30% of your total credit limit.
Take new credit thoughtfully: Taking new credit repeatedly can reduce the score. Apply only when needed.
Time, discipline and patience are required to improve credit scores. Gradually a good score will help you get better financial opportunities.
You can also get a personal loan through digital platforms like Moneycontrol. Through its app and website, 100% paperless process can be applied for personal loans up to Rs 50 lakh. Interest rates here start from 10.5% per year.
Summary
Is your credit score low? Do not worry, yet it is possible to get a personal loan. Learn how to help you a small loan amount, co-employer or correct financial documents.
Top banks/ NBFCs
50 lakhs
Get instant loan up to
Disclaimer
This fraction/article is written by an external partner and does not reflect the work of the editorial team of Moneycontrol. This may include references to products and services offered by Moneycontrol.