How to Get a Loan for a Bad Credit Score: Here’s What You Need to Know

When facing unexpected financial emergencies, applying for a personal loan is often the go-to solution. 

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The process is straightforward and requires minimal documentation. Lenders usually assess your CIBIL or credit score before approving a loan. 

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However, there are instances when borrowers may struggle to secure a loan for a bad credit score. 

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If you are in this situation, this blog will guide you on how to obtain a personal loan despite having a poor credit score.

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Understanding the Credit Score

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Before seeking loans for bad credit scores, it is important to understand the basics of a credit score. 

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A credit bureau determines a credit score by analysing various aspects of an individual, such as credit history and repayment capacity. 

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Lenders, including banks and financial institutions, check your credit score before offering any loan to you. This credit score showcases an individual's creditworthiness when it comes to getting a loan.

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The credit score is a quantifying number that ranges between 300 and 900. The more you build your credit score, the more worthy you become of getting a loan.

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A score of more than or equal to 750 is considered a good credit score. Scores below 600 are considered poor to avail of a loan.

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Why Does a Bad Credit Score Matter?

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A bad credit score can have a significant impact, as it helps lenders assess your creditworthiness when offering loans. 

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Lenders with credit scores between 300 and 550 may indicate that he or she has defaulted on payments and has unpaid dues.

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Individuals with a credit score of 550 to 600 are considered average, but they need to improve their credit score.

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Benefits of a Good Credit Score

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Besides getting information about a loan for a bad credit score, it is important to know the benefits of having a good credit score. 

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Below are the common benefits of having a favourable credit score in terms of applying for a loan:

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Avail Lower Interest Rates

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‍Loan applicants with a good credit score can get lower interest rates for their loans. This is crucial because a lower percentage of interest rates can allow you to get higher credit limits.

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Quick Approval on Credit

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‍A higher credit score indicates your creditworthiness, which allows your lender to take less decision-making time regarding your credit applications. 

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It becomes beneficial for you at the time of emergency when you need quick access to funds.

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Opportunities for Pre-Approved Loans

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‍With a high credit score, you may increase your chances of getting pre-approved loans and numerous credit card offers. ‍

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These offers allow you to get quicker access to loans due to minimal documentation and shorter approval times.

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How to Get a Personal Loan for a Low CIBIL Score?

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At times, securing funds for emergencies can be challenging due to a poor credit score, which increases the likelihood of your loan application being rejected. 

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However, here are some of the tips that you can follow to get a personal loan for a bad credit score:

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Stable Income

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‍Demonstrating a steady income can enhance your eligibility for a loan. The closer your income is to or exceeds the minimum requirement, the stronger your application will be. 

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In addition, working for a respected company or securing salary increments can create a more favourable impression with lenders.

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Lowering the Debt-to-Income Ratio

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‍You need to lower your debt-to-income ratio since it indicates the proportion of debt to your income. 

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Paying off credit card dues and other debt can allow you to get a personal loan for a bad credit score.

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Joint Personal Loans

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‍While applying for a loan, you can also bring a co-applicant to increase your chances of getting approval. 

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Whoever your co-applicant is, he or she must have a high credit score, which will increase your eligibility for the application.

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Additional Documents

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‍If you are seeking a personal loan for a bad credit score, you will need to provide some additional documents. 

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You must also keep your documents, like KYC documents and bank statements, as well as salary slips, well organised.

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Tips to Improve Your Credit Score

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In addition to searching for a loan, you should focus on improving your credit score. Follow the tips below to improve your credit score:

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• Check the Credit Report: Ask for a copy of your credit report from the credit bureau and review it carefully if there are some errors. Errors in these reports can hamper your loan application. 

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• Repayments on Time: You need to make timely repayments of your existing debt. Repayments on time can make a positive impact on your credit score, which will allow you to get instant loans. 

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• Diversify Your Credit Mix: You can have a mix of credit accounts, including credit cards, mortgages, and loans. This can help you improve your credit score. 

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• Regular Monitoring: You must regularly keep track of your credit score to monitor your progress in terms of repaying your debts.

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How to Check Your Credit Score?

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Aside from banks and credit bureaus, you can check your credit score online. The credit score checker from Jar allows you to check and helps you understand what qualifies as a favourable credit score. 

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The Bottom Line

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Individuals with bad credit scores need a loan too to address the financial gaps in emergency situations. 

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They can secure a loan for a bad credit score by stabilising their income, reducing their debt-to-income ratio, and opting for joint personal loans. 

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Additionally, providing collateral can increase their chances of approval, as it offers the lender added security. 

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Download the Jar app to avail instant loans up to ₹5 lakhs. You can also get the benefit of instant money transfer and flexible EMI options from this platform.

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Frequently Asked Questions

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1. What is the range of CIBIL scores in India?

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The CIBIL score in India ranges from 300 to 900. The CIBIL score with three-digit numbers showcases the creditworthiness of a borrower to apply for a loan. 

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2. Can I get a loan with terrible credit?

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Yes, you can get a loan for a bad credit score by taking certain steps. These include making your income stable, lowering your debt-to-income ratio, and looking for joint personal loans.

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3. What credit score is too low for a loan?

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A credit score less than 600 is too low for getting an approval for a loan. Individuals must achieve a credit score of 650 or above to get approval for instant loans.