A personal loan provides help in dealing with serious life challenges such as medical emergencies, surgeries, education, home renovation etc. That is why it is clear that in difficult times, it is only such personal loans that defend a borrower by providing him with a platform to deal with immediate financial challenges.
Still, it is crucial to note that securing a ₹3 lakh personal loan with a poor credit score can be challenging. Now, if you are a borrower with less than ideal credit profiles and weak credit scores, there are still several avenues provided by leading financial institutions to help you with personal loans even after having a less optimum credit profile. This write-up is dedicated towards discussing the same in detail.
A guide to credit score requirements
In India, a credit score of 750+ is generally considered as excellent by leading financial institutions. This score provides the borrower with the best possible opportunity to secure credit cards and personal loans at favourable terms.
Now some lenders even consider loan applicants with scores as low as 650-685. Still, such loans are offered only with pretty high interest rates and strict repayment terms. Further, any score of less than 650 is even more weak. It is considered poor, thus making approvals of loans even more challenging.
Other ways to borrow money
For aspirational borrowers with poor credit scores and weak credit profiles, there are several alternative lending options that are available:
- Prominent BSE-listed NBFCs: Such as Bajaj Finance, Manappuram Finance, L&T Finance among others offer personal and gold loans, often checking and analysing borrowers on income stability and their ability to provide collateral rather than just credit history.
- Secured loans: You can also secure a personal loan with a weak credit score by pledging a collateral, such as property, gold ornaments etc. Such a collateral boosts your chances of securing a loan smoothly as it lowers the risk of giving you the funds on the part of the lender.
- Guarantors and co-applicants: Now if you can ensure including a co-applicant with a sincere credit profile and a consistent credit history then such a step can bolster your chances of securing the desired loan by making the approval more than likely.
What are the steps to improve loan eligibility
To boost your chances of securing a personal loan, consider the following steps:
- Check and review credit reports: Regularly go through and check credit reports for mistakes and errors. Get them rectified on a prompt basis.
- Make repayments on time: Do check, write down and ensure that all debts and bills are paid on time to slowly but surely improve your credit score.
- Control your credit utilisation: Keep credit balances in check and ensure that you are not reliant on credit for day to day activities. Focus on keeping credit utilisation to under 30%.
- Never send multiple loan applications: Applying for several loan applicants from different lenders within a short period of time shows that you are desperate for funds, strictly avoid this behaviour.
Conclusion
Hence, it is very difficult to secure a ₹3 lakh personal loan with a poor credit score. Still it can be achieved by sensible planning, speaking to experts and applying through alternative lending platforms or going for secured loans or even by working on and improving one’s credit profile.
Aspirational borrowers should speak to experts, trained professionals, backing the same with serious research to explore the best possible options according to their financial needs, future goals and loan repayment limitations.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.
