Personal loan: Your credit score tells you how reliable you are in repaying the loan. It generally ranges between 300 to 900. Most banks and NBFCs in India prefer to give loans to people with a score of 750 or more.
If your score is low, it may be difficult to get a loan or the interest rates may be higher. But this does not mean that a loan cannot be obtained. If your income and financial condition is good, there are some ways in which you can take a loan.
Find lenders offering low score loans
Some fintech companies and small NBFCs also give loans to people who have no or very weak credit history. These companies look at your income, type of job and money coming and going in the account and decide whether you are eligible for the loan or not.
If your salary or savings account is in a bank, then the chances of getting a loan from there are higher because the bank already knows your transactions.
Add co-applicant or guarantor
If your credit score is low, make someone with a good credit score a co-applicant or guarantor. This assures the bank that the loan will be repaid on time. Keep in mind, if the installment is not paid on time, it will affect the credit records of both.
Provide collateral or take a secured loan
If your score is low, you can take a loan against property, gold or fixed deposit. This is called secured loan. In this, the risk of the bank is less, hence it is easy to get the loan approved and the interest rates also remain low.
If you want to take a personal loan, then giving a post-dated check or some small security can also increase the trust of the bank.
Strengthen application and repayment capabilities
Before applying for a loan, check your credit report and get it corrected if there are any errors. Show your stable job, regular income and low debt so that the bank is confident that you will be able to repay the loan on time. Many times banks not only look at the score, but also take into account your repayment capacity.
If you apply honestly, spend responsibly and make payments on time, you can get a loan even with a low credit score. By doing this gradually, your score will increase again and it will become easier to take a loan in future.