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Personal loans are a common option for borrowers who don’t have the collateral to secure their loans. Personal loans can be used for many purposes, but the criteria to get one are not changing. If your credit score is good, a personal loan can be obtained quickly. But what if you have poor credit? How can someone with bad credit get a personal loan? Even though there are not many options, it is possible to get a personal loan with bad credit.
What can You do If Your Credit is not Good?
A credit score of 750 points or more is considered good. Don’t worry if your credit score is lower than that. Lenders will still consider lending to people with credit scores below 750. These are the alternatives available to you for getting a personal loan with bad credit.
Approaching Banks
Bank accounts are required to save money, get credit cards, borrow money in the future, and do other financial transactions. You and the bank might have had a good working relationship regarding your transaction activity. The lender may still be willing to lend you a personal loan, despite your poor credit rating.
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Approaching NBFCs
Many Non-Banking Financial Companies, (NBFCs), only require a credit score of 650 to be approved for the basic level. These lenders can help you increase your chances of getting personal loans, even if your credit score is not perfect.
Peer-to-Peer Lender
These internet lenders offer personal loans based on your income. Lenders won’t check your credit score if you have a steady income. This makes it easy to get personal loans.
A Guarantor is Required
You might consider including a guarantor to help you get approved for a personal loan if you have poor credit. Keep in mind that the credit score of the guarantor will be affected if the loan is not paid back on time.
Joint Loan
You can apply jointly with a family member to receive a personal loan as a guarantor. Your credit score will be considered for approval. To avoid being denied a personal loan, you might need to fix your credit first before applying. This will help you avoid further damage to your credit score.
Debt Consolidation Loan
The debt consolidation loan is a loan that consolidates multiple loans into one loan. This loan can be used to pay off the previous loans. This loan is great if you have difficulty managing multiple loans, personal loan rates, or delinquencies.
This loan will allow you to pay off all loans that have been issued by different lenders. Instead of making five or six payments to the lender, you will make one payment.
Your credit score will improve significantly if you make timely payments on your consolidation loans. This is the best way to get rid of debt quicker and make your credit score more positive.
Search for lenders that only lend to borrowers with bad credit histories. Although a debt consolidation loan is usually an unsecured loan, some lenders may require collateral if the loan amount exceeds $2,500. Some lenders will only offer a portion of the total amount needed to close all loans. The remainder is your responsibility.
What Loan Type Should You Choose for Bad Credit?
Secured loans offer unique benefits. Secured loans can be easy to obtain because the lender holds your collateral in case you default on the loan. The rates are lower than an unsecured loan.
Unsecured loans are a great option if you don’t own any collateral. You may be able to get the loan disseminated quickly, as there is not much documentation required. There are higher interest rates. However, peer-to-peer lenders may be able to provide personal loans at a lower interest rate.
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