In 2020, the life of a middle-class individual revolves around multiple expenses. Most of the time, these expenses can be managed with your budget and savings. But in some emergencies, expenses become more than your monthly income. In such instances, a person will look for an instant personal loan.
What’s the benefit of a personal loan?
A personal loan is a multi-purpose loan. This loan is given by Banks & NBFCs so you can sort all your problems and expenses. This is an unsecured loan and hence needs no collateral. Personal loan interest rates are solely dependent on your eligibility that is set by the lender.
When you fulfill the personal loan eligibility, you can apply for a personal loan. At this juncture, Banks and NBFCs will look for job & income history to decide personal loan interest rates. They will also look at your credit score. With a good credit score, you can get the lowest interest rates a Bank can offer. With a bad credit score, you might get a loan at higher interest rates or get your application rejected.
How can I get a personal loan with a bad credit history?
There are low chances of getting a personal loan with a bad credit history. Banks and NBFCs usually will avoid giving customers personal loans with a bad credit score. You will have to improve your credit score through the following steps:
- Pay all your bills on time. Do not default on any payment. Consistent repayment over a long period of time will improve your credit score.
- Maintain a healthy credit utilization ratio. This ratio must hover around 35-40% maximum of your credit limit.
- Close debts one by one through a debt consolidation loan as it will help you save interest money. Closing multiple debts is seen as a good response by the Banks and NBFCs.
- Apply with a co-applicant or a loan guarantor. The Bank will consider your loan application as secure and offer you a personal loan.
- Check your credit report and search for errors. Each error that you correct will help you in improving your credit history.
- Apply for a lower personal loan amount. This is seen as good practice and Banks will mostly accept your loan application. Pay those EMIs on time and your credit score will improve in no time.
- If you can show the Bank that your income can easily support personal loan EMI, then they will accept your loan application. This applies to people who have additional sources of income or recently got an appraisal/bonus.
These are ways through which you can get a personal loan when you don’t have a good credit history. In case you are looking for the best personal loans at the lowest interest rates, apply here!