Bad credit score? Learn how to get a personal loan

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A good CIBIL score or credit score is a prerequisite for obtaining a loan. If your credit score is good then a loan can be easily obtained. Credit score helps the bank or financial institution to evaluate the creditworthiness of the borrower. Credit score ranges from 300 to 900. A credit score above 750 is considered good. A score between 550 to 750 is considered decent while a score below 550 is considered poor. You must have heard many times that a personal loan cannot be obtained if you have a bad credit score. However, this is not entirely correct. There are several ways through which you can obtain a personal loan despite a bad credit score.

Prove ability to pay EMI After the credit score, the income of the person applying for the loan is evaluated. With a bad credit score, you must convince the bank of your ability to repay the EMIs. If you assure the bank that you have a regular and permanent job, then your chances of obtaining the loan increase.

Apply with the help of a co-signer or guarantor With a bad credit score, a loan can be availed with the help of a co-signer or guarantor. On applying with the help of a co-signer, the bank will consider his credit score. Similarly, having a guarantor will increase the bank’s confidence that you will not default on loan repayments.

Mortgage In case of bad credit score, a personal loan can also be taken by mortgaging property. It acts like a guarantee. In this, instead of a guarantor, you must pledge an asset with the bank, which gets attached to the loan. If the loan is not repaid, the bank can sell the mortgaged asset.

Application for a small amount loan Having a bad credit score makes it difficult to get any kind of loan approval. However, if you ask for a personal loan of a small amount, then the loan can be availed. This reduces the risk of the lending institution as the loan amount is low.

Fix credit report error At times, errors and omissions in the credit report can lead to a bad credit score, which in turn affects your chances of obtaining a loan. Check your credit report online at least once a year. Any mistake evident in the credit report should be promptly reported and rectified.

To know more about credit score, click here: IIFL Finance