Your scores matter in almost all aspects of life. In the financial world, having a low credit score or poor credit history can often lead to the rejection of your loan application. Generally, financial institutions prefer to provide loans to those with a decent credit score, which is proof of their sound employment and a track record of paying their bills on time.
A good credit score ranges between 700-900 and is considered excellent. If your credit score is below 670, your score could be a barrier to accessing good financial tools. Some lenders work with these applicants to lend money for emergency expenses like medical bills, auto repairs, high-interest debt refinancing, and even debt payment consolidation.
However, lenders can charge higher rates of interest, higher fees, prepayment penalties, and arrears for borrowers they consider “high risk.” Hence, it is important to research before signing the blueprint to ensure you can meet the loan terms quickly.
Choose the highest estimate of personal loans for bad credit and consider different fees for credit scores, interest rates, and flexible repayment options.
Why Do You Have A Low Credit Score?
Your credit score may be low for one of the following reasons:
- You have not paid your bills on time.
- You applied for a credit card or another loan that failed.
- You took a loan in the past and got it settled or did not pay by the deadline.
- You have no financial history.
Things To Consider Before Applying For Personal Loans For Poor Credit
- Do good research on various lenders and select the one that offers the lowest interest rate.
- Check your eligibility to make sure your loan application has not been rejected, as this could further damage your credit score.
- Consider the terms and conditions of the agreement and assess your repayment ability before deciding to take out a poor credit loan.
Which Lender Offers A Loan With Poor Credit?
Besides banks, you can try taking out a personal loan from the below-given options if you have a low credit score:
- Non-banking financial companies (NBFCs) – Many NBFCs offer personal loans through online applications despite their low credit score, but they may charge slightly higher interest rates.
- Peer-to-Peer (P2P) Lending: There are several lending sites called P2P sites that offer people with low credit scores up to Rs. 50,000 over 12-60 months.
Lenders Who Provide A Personal Loan With Poor Credit Score
Avant
Taking a personal loan is beneficial when you want to consolidate all your debts into one loan and you don’t score very well on the credit rating (minimum requirement of 580). Avant provides next-day funding.
The downside is its high APR which ranges from 9.95% to 35.99%
Clix Capital
Clix Capital is renowned for catering to personal loan requests, especially if the credit score is low (560-580). The APR varies from person to person depending on the credit score and the eligibility criteria.
A thorough verification and clean documentation may get you a personal loan at lower processing fees and a reasonable limit.
Upgrade
Upgrade allows a low minimum credit score requirement (550) with maximum repayment terms. You may get a lower rate if you apply for a co-applicant loan.
The APR ranges from 5.94% to 35.97%, and the online application process is easy.
Rocket Loans
You can get a loan within one day of application at an APR of 6.72% – 29.99%.
But a stringent background check and verification are conducted by the lender. You can get a loan with a credit score of 580, and they cover a wide loan range.
Types Of Personal Loans For Poor Credit Score
There are different types of bad debt loans, but the most common are unsecured personal loans. Even if you have a credit score of less than 579, you can get quick financing to cover unexpected costs; but it would be at a higher cost.
You shouldn’t expect the lowest interest rates or the best terms with a poor credit score, as personal loan interest rates vary based on the scores and eligibility requirements you meet.
Here are some options to apply for a personal loan if you have poor credit history:
- Gold Loan: To get a gold loan, you can keep your gold as collateral so that the lenders don’t consider your credit score. Loans can typically go up to 75% of the lender’s set gold value, with interest rates starting at around 7% per annum.
- Real Estate Loans (also known as Loan Against Property): These loans can be selected by anyone who has registered residential, commercial, or industrial properties in their name. Interest rates start at around 7.35% per annum, and the loan duration is usually a maximum of 15 years. Some lenders offer a retention period of up to 20 years with a Loan Against Property.
- Securities/Insurance Lending: You can also opt for a securities loan if you invest in mutual funds, stocks, bonds, insurance, etc. The loan amount and interest rates you qualify will depend on the collateral you wish to pledge based on general market conditions and the lender’s risk assessment policy.
- Top-Ups: If you have an existing home loan, you can top it up by applying for an additional loan. Interest rates on additional home purchase loans are likely lower than other credit options available to mortgage borrowers.
Conclusion
Many lenders are reluctant to lend to people with low credit scores due to the high risk of default. Low credit scores indicate poor repayment ability for people, and these people have a hard time finding a lender to offer a loan.
Personal loans for bad credit can save people with low or no credit scores. These loans are usually secured loans. In other words, if anyone wants to take out a loan, they must provide collateral, such as real estate, gold, or securities.
Collect critical data from various lenders to identify the most important factors before borrowing. Identify lenders with fees, affordability, repayment terms, and other characteristics and seek a fair and comprehensive assessment to make the right loan application decisions.
If you want to apply for instant personal or business loans, Clix Capital promises fast and accessible loans with minimum paperwork and quicker sanctions.
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