A credit score is a proof or a document of your creditworthiness. It means when a bank or NBFC lends you, the probability of risk associated with it and the loan’s default. Generally, the credit score is also called the CIBIL score. The Credit Information Bureau of India, also called the CIBIL, is one of the most preferred credit agencies authorized by the Reserve bank of India. Generally, the score lays between the range of 300 to 900 and higher the score the higher are your chances of getting the loan.
Most of the time, financial institutions give loans to a person who has a credit score of more than 750, but if your credit score is low, and affected by various factors, then there is a very high probability that your loan application may be rejected. But financial emergencies can come at any time, and in that scenario, you can opt for an online personal loan. These agencies reanalyze your credit history and make an in-house assessment to give loans. And as there is a probability of your loan getting defaulted due to your bad credit history, they charge higher interest than other financial institutions.
A borrower seeking personal loans with a bad credit score can choose between these loan options:
Secured Loans: It will be easy for you to take loans against some property or FDs when applying for loans. According to the bank’s point of view, this makes the loans more secure, and for the borrower’s benefit, it will reduce the interest charged.
Unsecured loans: When you are unable to give any collateral or pledge any stocks or bonds and have a bad credit score, the institution will check your fixed income source and debt-income ratio. But then, the interest charged will be much higher.
Digital lenders: With the boom in technology, several companies are in the financial sector. These institutions provide loans through their mobile apps. They don’t have rigorous checking rules and give hassle-free online personal loan for short term purposes.
NBFC loans: Because of strict regulations and higher checks in documents, many people prefer NBFCs or non-banking financial institutions. The chances of getting loans from NBFCs are much higher from banks because of their work nature. However, you can expect a higher rate of interest compared to the banks.
If your credit score is bad, you come to a risky proposition from a bank’s point of view. Some banks or NBFCs can also charge unnecessary processing fees or other hidden charges because of bad credit scores. Despite that, you should check eligibility first before applying as a borrower when they provide loans.
You should also understand their terms and conditions very well. Read all the necessary clauses including the fine print before getting any loan. In the case of an online personal loan, you should check their ratings in the app store and check customer reviews as these apps have a bad reputation for heckling their customers sometimes.
You can avail of personal loans from most of the scheduled private sector banks like Axis bank personal loan or ICICI bank personal loan with an interest rate of 12.00% pa onwards and 10.50% pa onwards
NBFCs like Tata capital or Fullerton India have a good image in the market by simultaneously providing loans with 10.99% pa onwards and 11.99% pa onwards
Popular digital lenders like PaySense or Early salary provide online personal loan according to your salary and creditworthiness. Early salary gives loans at the rate of interest around 2.50% per month onwards, and PaySense provides loan at 15.96% pa onwards
Getting personal loans with a low credit score can be tricky at times. Despite that, institutions are providing loans with the advent of technology and several govt schemes and targets have enabled these lenders to create products like Axis bank personal loan which provides the best deals in terms of interest and tenure to borrowers who have a bad credit score. You, as a borrower, should use this chance wisely and for more details you can visit Andromeda Loans , to get to know about the latest deals and offers.