Personal loans are unsecured loans as no collateral is offered on them. This is why a good credit history is an imminent point taken into consideration by money lenders. Having a bad credit score lowers the chances of you getting your loan approved. You can try to get your personal loans from loan brokers like Personal Loan Pro if you’re in the need of some finance and searching for trusted lenders.
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What is a Personal Loan?
A personal loan is cash borrowed from a lender for almost any reason, such as paying off debt, financing a sizable purchase like a car or boat, or defraying a significant expense like a wedding or vacation. It is also known as a consumer loan and it describes any situation in which an individual borrows money for personal needs.
Online lenders, regional banks, and credit unions all offer loans, and the money is given to you all at once. Once you get the money, you have to keep paying the loan until it’s all paid off. The fact that personal loans have a set interest rate and payback schedule compared to credit cards work as its main advantage in comparison to other loans.
What is a Credit Score?
It is a numerical rating representing the perceived ability of a person or organization to fulfill their financial commitments, based on an analysis of their credit history and current financial circumstances. Essentially, it represents the creditworthiness of a person.
Credit scores range from 300 to 850, with 700 being considered good. You are eligible to apply for a loan if your score lies in the range of 600–700. A credit score is considered low in the range of 400-500. The higher the scores are, the better the chances you get of getting your loan approved by the lender.
Why Do you Have a Bad Credit History?
Loan lenders use credit scores to determine whether borrowers will repay their loans on time. A limited credit range does not help your case in the ways you would like to be helped. Many factors contribute to a bad credit score. Some of them are:
- Taking out several personal loans at once.
- Missing a loan installment
- A high credit utilization ratio
- Failing to meet your credit card commitments
- Repetitive rejections of loan applications
Ways to Obtain Personal Loans With A Not So Good Credit History
Any additional source of income or a hike in your salary will be happily welcomed in favor of your application for obtaining a personal loan from loan platform like Personal Loan Pro. Your capacity to repay your loans adequately is assessed by your earning potential. If you have a good income, it can be instrumental in getting your loan approved. There is a possibility that you will be charged a higher interest rate.
Finding a cosigner with a strong credit history
If any of your family members, friends, or colleagues have a strong credit history, you can make them your guarantors or co-applicants while applying for a personal loan. This increases your chances of getting loan approval and also gives you time to build your own credit. You have to be punctual in your repayments, as a missed payment will show as a bad rep on your cosigner’s credit score.
A low credit score naturally comes off as a weary option for the creditor who is loaning you money on an unsecured personal loan. So, you should settle for higher rates of interest as a borrower with a low credit score. In some cases, the amount sanctioned for the loan is relatively less than the rates of interest charged by the lender. You should only consider this option if you see no way out of your financial obligations or are in immediate need of financing.
Pledge a collateral
A personal loan can be classified as either secured or unsecured. In an unsecured loan, your creditworthiness determines the approval for your loan because there’s no other security that the lender can rely on for you to make timely repayments. In the case of a secured loan, you can pledge any valuable asset you own as collateral. The assets can be your retired savings account, your vehicle, jewelry, etc. Go through the page of Personal Loan Pro and check it out if you are curious to know more about personal loans and find trusted lenders to get loans from.
Apply for a low-person loan amount.
You are already perceived as a high-risk candidate by the lender because of your bad credit score. This is the reason why you can’t request large loan amounts from your lender. A lender will feel more inclined to grant your loan request if it is for a lower amount. Moreover, a lower loan amount is easier to repay as well.
Correction of errors on your credit report.
Your credit report can have errors. This occurrence is usually seen when the latest information hasn’t been updated on your record. If such is the case, then you should regularly update your credit report; otherwise, it can lead to some losses on your credit score with no fault of your own. Regularly get your score updated and provide corrections if needed. This helps boost your credit score and makes you a better candidate for a personal loan.
The measure mentioned above will help you obtain a personal loan despite having a poor credit score. You should, nonetheless, focus on improving your credit scores. It will take a considerable amount of time, but the long-term benefits it provides make it worth the effort. You can maintain a good credit score by repaying your existing debt, reshaping your spending habits, and maintaining a habit to make timely EMI payments and pay your utility bills on time.
This way you can restore your credit scores, which will further make you eligible for loans in the future where they have higher chances of getting approved quickly and swiftly. If you don’t care for such advice, your credit score will only plummet further and it will be harder on you in the long term.