Financial hardship can strike anyone. Unexpected events, changes in employment status, illness or changes in the income levels may significantly impact one’s cash flows. At such times it may be difficult to keep up with the debt obligations and bill payments. However genuine the reason maybe, the hard truth is that any defaults on loans negatively affect the credit score. Any delays or non-payment of dues, over utilization of credit limit, multiple loan enquiries gets recorded in the credit report and bring your score down. Since your past credit behaviour is used to evaluate your creditworthiness, most lenders shy away from lending to risky borrowers with bad credit score. If you find yourself in the same boat, then you must have realized that securing a loan from the leading banks and financial institutions with bad credit becomes quite challenging. Since they have very strict guidelines relating to the credit score while approving a loan application, winning their trust with a bad credit seems almost impossible.

But, what if an urgent financial requirement comes up and you need a loan to fund it? Will your past financial mistakes deprive you of any new loans? Or is there a way out? Thankfully there is! When the leading banks shut their doors for people with bad credit, several more doors open up. There are many other avenues where you can look for personal loans with bad credit. So whether you need funds for marriage, education, vacation or even debt consolidation you can get a personal loan even with a bad credit history. Try out these options without the fear of getting rejected.

Secured Loans- The main reason why CIBIL defaulters are rejected is because no bank wants to risk its money with someone who may fail to repay the money back. Collateral secures the investment of the lender, as the lender can withhold the collateral in case you default. So if your credit score fails to impress the lenders; you can offer your assets like gold, fixed deposits, equity investments or even your house as a security. This way you can obtain a personal loan at a reasonable rate of interest even with bad credit.

Peer to peer lending- With the growth of the internet, people search for everything they need online. Online marketplaces bring together the lenders and borrowers on the same platform. So rather than approaching a bank, you can take a personal loan directly from an individual. You will be amazed by the number of people willing to lend money at attractive rates to credit worthy individuals. Lenders at the P2P platform do not measure your creditworthiness just by means of a credit score. They look at various other parameters, like your income level and employment status. Make sure you have reasoning for why you defaulted in the past or why your score is low. If you seem convincing enough, you can get quick approval of your personal loans at very attractive interest rates.

Local bank or credit union- It is always better to contact a local institution with whom you’ve had a long term relationship than any unknown lender. Since your local bank knows your financial situation better, it may be more flexible and lenient with its approval requirements and sanction your loan even if your score is less than perfect. Make sure you carry your income proofs with you. By showing that your debt to income ratio is less, you may be able to win over their confidence that you have the ability to pay the monthly EMIs.

Private lenders- Just google “Personal loan for CIBIL defaulters” and you can get in touch with several private lenders who are willing to lend you money at a slightly higher rate of interest. They see your low credit score as an opportunity to get higher returns on their investment. A borrower is assessed on several other parameters than just a credit score. If he is found to be a genuine creditworthy individual, capable of repaying the money then a low credit score does not deter people from lending to him.

So if you face a rejection from the mainstream banks and financial institutions do not lose heart. Try out some of the options mentioned above and you will be able to secure funds even with a low CIBIL score. A high debt to income ratio, collateral, employment status and several other factors can be used to convince private lenders that you can handle the loan repayments. Alongside, make all efforts to rebuild your credit. By making timely payments on your new loan and keeping your utilization levels low you can work towards improving your credit score. A high score will eventually help in getting loans at low interest rate and thereby reducing the cost of loan.

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June 2021