Did You Know?
We serve loans, the best way you can borrow
Getting a personal loan for bad credit can seem impossible. For sure, it's very tough to get one, especially since it is an unsecured loan that requires no collateral. The lender may find you a risky borrower. But that shouldn't make you lose hope. Like other financial products, borrowers of personal loans must provide documents of their income and have their credit checked. Banks and other lending institutions mostly prefer borrowers with a good record of paying bills on time and have multiple ways to repay the loan.
Acquiring a personal loan can be tricky with bad credit, but this blog post will reveal the tips and tricks to obtaining one. We'll also provide insight that may improve your chances of being approved. Keep reading to learn all the advice necessary for securing a cost-effective personal loan to sort out your financial woes.
According to the major bureaus' credit score scales, any number below 580 is considered a poor credit rating. A person with such a score is known as a subprime borrower, and they're typically perceived as being riskier.
A bad score can prevent you from qualifying for various loans, like business loans or car loans. Besides, when an emergency strikes, you'll be left in a very tough situation since you have lower chances of getting approved for a personal loan. Due to that, it is ideal for you to improve your score so that you can easily get approved for a loan.
Normally, your credit score comprises several critical aspects, including your payment history, level of credit utilization, and the hard inquiries you have. Do not overlook these components if you want to maintain good standing with your creditors and an excellent rating.
If you have a good or excellent score, you can get a personal loan with an average interest rate of approximately 13 percent. But, if your credit is only 'average' or 'poor,' the interest rate will be much higher.
| Credit Score | Average Interest Rates | Credit Remark |
|---|---|---|
| 720-850 | 10.73% to 12.50% | Excellent |
| 690–719 | 13.50% to 15.50% | Good |
| 630–689 | 17.80% to 19.90% | Average |
| 300–629 | 28.50% to 32% | Poor |
These are average rates. So, some borrowers may get lower rates for their loans.
Yes. You can avail of a personal loan even with a poor credit score. But it does come with caveats. You should show other means of repaying the loan and prove your capability to repay it on time.
Moreover, if you have a lower score, lenders usually charge higher interest rates for borrowers with a low credit score as they consider them high-risk applicants. Before signing off on any new loan terms, ensure you compare different lenders interest rates and research.
Remember that late or missed payments will negatively affect your credit report. If you are looking for ways to obtain a personal loan with your bad score, then check out the options below:
Firstly, check your report for errors that could have been made. You never know; maybe your reports weren't updated correctly. You can access your credit report from CRISIL or ICRA, the two best credit bureaus in India. Each of these will be accompanied by a detailed account featuring your past payments and any potential discrepancies.
It's essential to periodically review your credit reports for any inaccuracies. These errors can significantly lower your credit score, so rectifying small problems as soon as possible is advisable. In case you get errors on your report, you can take steps to dispute those errors by filing a complaint with the credit bureaus.
After resolving the errors, you will have a clear picture of your score and can make decisions when seeking personal loans.
If you have a low credit score or no credit history at all, getting someone with an excellent rating to cosign your loan is one sure way to give the lender assurance that your loan application will be accepted. You should choose a cosigner that has a good score.
By having a cosigner with good credit, lenders take on less risk, which makes it easier for you to get approved. Though this option has its pros, there are also some cons as well. A cosigner with excellent credit can increase your chances of getting a loan with favorable terms and rates, which is a major benefit.
You can secure a loan at a lower APR and repayment amount or get a low origination fee using a cosigner. Whether it's an auto loan, student debt, or home equity line of credit, having someone cosign for you may result in better interest rates and reduced origination fees. This means less risk for the lender.
When deciding who to choose for this important role, ensure that he/she has an excellent track record in terms of credit score history and income. You can use someone you trust, like a spouse, guardian, parent, or friend. This will increase the likelihood of your loan being approved.
Also, remember to inform them beforehand about the responsibilities of being a cosigner. Shouldering the burden of loan repayment must be taken seriously, regardless if it's for bad credit personal loans,debt consolidation loans, auto financing, or credit cards.
Try to set up an autopay when you use a cosigner to get a loan. This will help ensure that neither you nor your cosigner incurs any added fees in the future due to missed payment deadlines. When you take a cosigner for a loan, it's a huge responsibility that both of you should take seriously.
Therefore, ensure all payments are made on time so you and your cosigner can maintain your credit scores and avoid any potential damage to your financial standing.
Before you decide to take low credit score loans through a cosigner, do some research. Such loans have advantages and drawbacks; hence, make sure you are well-informed before applying.
You can still get an unsecured loan with bad credit if other lenders reject your application. However, remember that you may get a loan at a higher interest rate than the secured loans because there's no collateral.
The popularity of unsecured personal loans has skyrocketed in recent years, which means personal loans are now easily available to those with bad credit. A personal loan for bad credit comes with an APR and loan amount that best suit your budget. Many online lenders offer this type of product. So, if you're having trouble accessing funds due to your poor credit score, it may be an option worth considering.
You will find many online lenders who offer such loans. So, if you happen to be struggling to secure loan funds due to your credit score, unsecured personal loans can be your ticket to getting the finances needed.
If you have a poor score, you can still get a loan by providing collateral as a security. Collateral is an asset used to secure a loan, and when you default on payments, the provided security will be repossessed by the lender. The lenders usually have no qualms about giving loans when there's something tangible put forward as security for the loan.
You can offer your property as security, provided it's not mortgaged, but you must ensure the value of your property is higher than the loan amount requested. It also reduces interest rates since lenders are more willing to take on more risk with less reward. There are a lot of lenders out there who specialize in bad credit loans and can provide you with options for securing a loan using collateral.
But, a little research is what you should do to find the best lender who will offer better loan terms.
Most lenders allow you to include all sources of income when applying for a loan. These income sources can include child support, retirement, alimony, etc. Lenders prefer customers who can make repayments without difficulty, and they assess this using your income sources.
Your poor credit feels like a closed door to many lenders. lendingplate sees beyond your Cibil score to your true potential. The loan process is quick and simple. They check your application fast and put money in your account the same day. The team treats you with kindness and respect. They do not judge your past financial mistakes. The lender focuses on helping you build a better future with fair rates and clear terms.
Banks turn you down without seeing your whole story. lendingplate looks deeper at what makes you reliable beyond just numbers. Here are key factors to check before approving your loan application.
Your regular earnings show us you can repay your loan. Lenders look at your salary slips, bank statements and tax returns to verify your income stability. Part-time work, freelance gigs, rental earnings or business profits all count toward proving your repayment ability. Higher income improves your chances even with bad credit since it shows financial strength to manage new debt.
Working at the same company for years makes you look reliable. Job-hopping raises red flags for most lenders. A longer employment history balances out credit score concerns. Your work steadiness helps us trust your ability to repay consistently each month without disruption from job changes.
Your existing loans affect how much more you can borrow. Lowering existing debt means you can take on more financial responsibility. High credit card balances and multiple loans might limit new borrowing options. Paying down some debts before applying could improve your approval chances significantly.
Recent loan applications suggest financial desperation to lenders. Too many credit inquiries damage your score further. On-time payments on current accounts help your case. Positive changes in your recent history can outweigh past mistakes when lenders review your application.
Regular rent payments show responsibility with money. Utility bill payment history demonstrates financial commitment. Mobile phone contracts illustrate consistent payment behaviour. These everyday financial activities help fill the gaps when traditional credit history is lacking or damaged.
Getting rejected feels terrible. Follow these practical tips to boost your approval chances substantially when applying with bad credit.
Order your free credit report before applying anywhere. Look for mistakes that might be hurting your score. Dispute any errors with the credit bureaus immediately. Sometimes, fixing simple reporting errors can boost your score quickly. Your report might show accounts you've already paid or loans that aren't yours.
Having money saved shows financial discipline. Even small savings accounts impress lenders surprisingly well. Savings demonstrate you won't default at the first unexpected expense. Try saving consistently for three months before applying to strengthen your application significantly.
Pay down credit card balances before applying. Focus on high-interest debts first to save money. Even small reductions in your debt load help. Lower debt-to-income ratios dramatically improve approval odds. Your application looks stronger when you show you're actively managing existing financial obligations.
A trusted family member can strengthen your application. Choose someone with a stable income and good credit. Both parties become equally responsible for repayment. This option works well for spouses, parents or siblings who want to help improve your financial situation.
Putting money down reduces lender risk significantly. Even small security deposits improve approval chances. This shows commitment to repaying the loan. Security funds get returned after successful loan completion. This approach works especially well for borrowers with very limited credit history.
Making smart money choices means weighing both benefits and risks. Personal loans with bad credit have important tradeoffs to consider. Understanding these points helps you decide if this option truly fits your needs. Think carefully about these factors before signing any loan agreement.
Fast Money Access
Emergency expenses won't wait for credit repair. Applications typically take minutes to complete online. Funds often arrive in your account within 24 hours. This quick timeline helps handle urgent financial needs immediately. When your car breaks down, or medical bills surprise you, speed matters more than perfect terms.
Flexible Usage Options
Use the money for almost any legal purpose. Pay medical bills, fix your home or consolidate debt. Fund education expenses or cover wedding costs. No restrictions on how you use the approved amount. This versatility makes personal loans more practical than specific-purpose financing options.
Credit Score Improvement
Regular on-time payments gradually raise your score. Each successful payment creates a positive credit history. Loan completion looks good on your credit report. Building this positive track record helps qualify for better rates later. Many borrowers use these loans specifically as credit-building tools.
Higher Approval Likelihood
Bad credit specialists understand credit challenges better. Our alternative assessment methods increase your chances. Getting approved feels like a fresh financial start. This accessibility provides options when mainstream lenders have closed their doors.
Higher Interest Costs
Bad credit means paying more over time. These higher costs significantly increase total repayment amounts. Calculate the full cost before accepting any offer. The convenience of approval sometimes comes with substantial long-term expenses.
Strict Payment Terms
Miss payments and face serious consequences. Late fees add up quickly and hurt your score. Payment schedules are rarely flexible once set. Budget carefully to ensure you can meet every deadline. The rigid structure leaves little room for additional financial challenges during repayment.
Debt Cycle Danger
Taking new loans to pay existing ones causes problems. Some borrowers end up deeper in debt. High interest makes escaping the cycle difficult. Carefully consider if you're solving or extending financial troubles. Without proper planning, these loans sometimes create more problems than they solve.
Alternatives to Personal Loans for People with Bad Credit
Sometimes, traditional personal loans aren't your best option. Other financial solutions might better fit your situation. Consider these alternatives before committing to a high-interest personal loan. Each option has unique benefits for people with credit challenges.
Secured Credit Cards
Build credit while making regular purchases. Deposit money first as security against default. Use responsibility and make all payments on time. Your credit score improves with consistent good behaviour. Start with small purchases and pay the balance fully each month for the best results.
Credit Union Loans
Member-owned institutions often offer better terms. They focus on helping members, not maximising profits. Membership requirements vary but are usually easily met.
Peer-to-Peer Lending
Connect directly with individual investors online. Skip traditional bank assessment processes entirely. Rates often fall between bank loans and bad credit options. Applications focus on your story, not just numbers. These platforms create opportunities for borrowers who don't fit conventional lending criteria.
Secured Loan Options
Use your assets to back your borrowing. Cars, property or investments can serve as collateral. Interest rates drop significantly with security provided. Approval becomes much easier, even with bad credit. The risk is losing your asset if you fail to repay as agreed.
That's all there is to obtaining a personal loan for bad credit. As you can see, it's possible to avail of a loan with bad credit. However, it can be challenging and expensive. You can use a cosigner with a good credit score, pledge collateral, or P2P lenders. With these ways, you can obtain a loan you've been looking forward to.
Furthermore, improve your credit score to get a loan without struggles. A higher credit score guarantees more favorable loan terms, like a lower APR and other associated costs.
Normally, the lender calculates the interest rates based on your income, loan amount, and repayment tenure. Besides, creditworthiness is also taken into consideration. Note that your credit score and history are two major factors determining the interest rate you get on a particular loan. However, only those with good credit can get low rates. If your credit is much lower, don't expect to get a low rate.
The interest rates for bad credit loans can vary between 3% and 36%, but there is a high chance they may increase over time. But, if you decide to improve your score before applying for a loan, the chances of loan approval are high.
Certain lenders provide bad credit loans to those who didn't build their credit history. It can be difficult to get a loan if your credit score falls below 580, but luckily some lenders will grant funding to those with scores ranging from 580 to 600.
Each lender has an eligibility requirement you must meet for you to get approved for a loan. Therefore, ensure you meet the set criteria before you start applying for the loan. Remember, many hard inquiries can hurt your credit score. So, take the time to assess your credit score and make any necessary improvements before submitting that loan application.
There are some activities we do that can hurt our credit scores. Below are some causes of a low score:
Credit Unions: This is a great option to get a loan with a poor score. But to borrow from them, you must be a member first. Credit unions consider your history as a member when approving a personal loan. So, when you have a good history with the credit union, you will likely be approved for the loan.
Online lenders: Some online lenders provide loans to borrowers with bad scores. Apart from that, they will offer quick funding and ideas on how to improve your score.
A score below 580 is typically considered poor. Scores between 580-669 are fair but still challenging. Most traditional lenders prefer scores above 670 for standard loan approval. Lower scores result in higher interest rates and stricter terms.
lendingplate charges processing fees between 1-5% of your loan amount. The interest rates range from 12-36% based on risk assessment. Late payments incur a mandate return fee of ₹500, including GST. Early repayment attracts 5% foreclosure charges unless paid after your first due date.
Most legitimate lenders always perform some credit verification. True "no-credit-check" loans often have extremely high interest rates. Alternative data like bank statements and income proof can help.
Secured loans offer lower interest rates than unsecured options. Providing collateral improves approval chances. However, you risk losing your assets if you default. Unsecured loans protect your assets but cost more. Your choice depends on your risk tolerance and available assets to pledge.
At lendingplate, applications take just minutes to complete online. Our initial assessment happens within hours, not days. Once approved, funds reach your account the same day. The entire process, from application to disbursal, typically takes less than 24 hours. Emergency applications can sometimes be processed even faster.
You'll need identity proof (Aadhaar, PAN, voter ID). Income documents like salary slips or bank statements. Address proof – such as utility bills or rental agreements. Six months of bank statements showing regular income. Sometimes additional documentation is for self-employed applicants. Keep these documents ready to speed up your application process.
Download our personal loan app to apply for a personal loan. Get up to 2Lakhs* as a personal loan. Download Now!
Sign into avail a personal loan up to ₹ 2,50,000
Unifinz Capital India Limited is a Non Banking Finance Company (NBFC) registered with the Reserve Bank of India (RBI). lendingplate is the brand name under which the company conducts its lending operations and specialises in meeting customer’s instant financial needs.
