Mumbai: As a personal loan borrower, you might have come across phrases such as “Fulfill your dreams now—Turn your dreams into reality with a personal loan” or “Secure your dreams with an instant Personal Loan.” A personal loan is an unsecured loan, meaning the lender does not require collateral. The eligibility criteria for personal loans are stricter than those for secured loans. Lenders consider several factors when assessing a personal loan application. These factors include the applicant’s age, occupation, annual income, ability to repay, and temporary or permanent residence details.
Other important considerations are the individual’s business or employer details and credit history or score. Having said that, it can be challenging to qualify for a personal loan if your credit score is low. Your credit score is crucial in the application process as it shows lenders how you have managed previous loans. Typically, a credit score ranging from 650 to 699 is considered average, while anything below 649 is considered a poor CIBIL rating. A poor credit rating can result in loan rejection or approval with a high-interest rate. Your credit score is a reflection of your creditworthiness. A good credit score will benefit you in various ways when applying for personal loans, including securing a lower and more attractive interest rate.
How to qualify for a personal loan if credit score is low?
A person with a low credit score may opt for a guarantor, probably someone with a sound credit standing. They can also opt for a secured loan by depositing any collateral security with the lender. In short, a better option would be to pledge an asset or use a guarantor. That way, loan borrowers can borrow at a low cost and rebuild their credit score by making timely payments. Further, a person with a low credit score also has the option to apply for a joint loan with the joint holder account, which has a better and sound credit history.
Today, there is a higher chance of obtaining loans from Non-Banking Financial Companies (NBFCs). However, it’s essential to be cautious because the interest rates on such loans are high. On the other hand, many Fintech companies now use a broader range of data to assess borrowers without credit scores, who typically struggle to obtain bank loans. Lastly, it is always better to find ways to improve one’s credit score with the help of a financial advisor or consultant who can help prepare a good financial planning base.
It can be challenging to obtain personal loans, especially if the borrower’s credit score is low. Learn how to qualify for a personal loan if your credit score is low. Business Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
