Your sister is getting married and you are in need of funds to meet the marriage expenses. Well, acquiring a personal loan is the best option you have but, unfortunately, you have a bad credit score. So, are you wondering how you are going to meet all the marriage expenses? A bad credit score can play a spoilsport for all those people who are looking to acquire any type of loan, especially a personal loan. If you don’t have a good credit score, you have more chances of getting your loan application rejected.
Significance Of Credit Score For A Personal Loan Approval
First and foremost, you should know that a personal loan is an unsecured loan, this means you don’t require any collateral or guarantor. If you have a bad credit, lenders will deem you as a financial risk as they don’t have collateral to fall back on to recover their dues. Well, in the case of a home loan or car loan, the lender can easily get rid of the car or home in case you default.
Since a personal loan is an unsecured loan, you cannot acquire a personal loan easily if you have a bad credit score. Every lending institute consider your credit history before they make their final decision, therefore it is doubly important to have a respectable credit score.
Getting A Personal Loan With A Bad Credit
- Even if you have a bad credit score, you can acquire a personal loan, but in this case, it will come with harsh terms and conditions related to the repayment. Since you are not having a good credit score, the lenders will be more concerned about securing their money against any probable case of default. They may offer high-interest rates or even smaller loan amount. In case you don’t have apt time to make improvements in your credit score and be eligible for suitable terms, then this is the best available option.
- Do you have a stable job with a good income? If you are nodding your head in affirmation, then you have more chances of getting an approval for your personal loan application. In addition to the credit history, annual income is also one of the key factors your lender will look at while approving the loan. If your lender thinks that you are drawing a handsome salary and you will continue in your employment at least until the term of the loan then, in this case your lender will be more than happy to lend you. If you are having a stable job, then this exhibits your repayment competence.
Mistakes People Make That Affects Their Credit Score
Generally, people are not aware of the significance of a good credit score until their personal loan application gets rejected. I am going to discuss some common reasons why you might have a bad credit score –
- When you apply for credit (credit cards or loans) from multiple lenders in a short period of time.
- When you fail to make the payments for your EMIs or loan instalments on time.
- When you get close to or surpass your total credit limit.
- When you have a consistent history of delayed credit card payments.