You as a borrower will not have to have a collateral. You must have a high credit score to avail an unsecured loan. The loan is not guaranteed by any asset or property. The interest on the loan is fixed and due at the end of a specific time period.
Unsecured loans are given to the borrower based on their creditworthiness
To avail an unsecured loan, maintain a high credit score. You must make all the payments and repayments on time and not default even once.
Which Lenders offer Bad Credit Loans?
If you have a low credit score, pledging a collateral can help you get a good deal on loans. Providing a collateral lowers the risk associated with lending to you and hence, you can negotiate with the lenders to offer you lower interest rates. Such loans that are given against collateral/security are known as secured loans.
However, if you do not have any collateral to pledge and are looking for unsecured loans, you may be eligible for a loan if your monthly earnings are on a higher side and you work for a reputable firm. In such cases, banks will charge you higher interest rates and there are also chances of you getting lower loan amounts. For instance, if under normal circumstances, your loan amount eligibility is about 80% to 90%, it will be 65% to 70% because of your poor credit score. There are also chances that you will be offered shorter repayment tenures as banks will look at collecting the loan amount as soon as possible.
Apart from banks, there are two other options that you can try if you have a poor credit score and wish to avail a personal loan –
- Non-Banking Financial Companies (NBFCs) – There are many NBFCs that will offer you a personal loan despite your low credit score but may charge a slightly higher rate of interest. Usually, NBFCs are more flexible than banks when it comes to credit scores. Some NBFCs have sanctioned loans for credit scores that are as low as 360.
- Peer-to-Peer Lending (P2P) – There are some lending websites, called P2P websites, that offer loans of up to Rs.5 lakh with tenures ranging between 12 months and 60 months to people with low credit score.
- Speaking to your current financial provider to offer you a tailored loan considering your circumstances. The current financial provider may be able to help you out in this regard than you going to a new provider for a loan.
- You can get an overdraft on your current account at 0% interest rate for a certain amount. Never cross your limit on the overdraft as the unarranged overdraft fee will turn out be very expensive.
- Credit unions that are community operated can offer a real alternative to banks to those going through financial difficulty. You need to be a member of the credit union to avail the loan. These organisations are supportive and their main intention is to serve their members.
- Credit cards are another option that is available to those with a bad credit history. There are dedicated cards for the people with bad credit ratings. Though they may have lower credit limits or with higher interest rates. Also remember a failed application will damage quick Napoleon payday loans your credit card further.
- There are payday loans. But it is advisable not to take this loan.
- Use your own savings for as long as you can. It is better to have used your saving than to pay the high interest that are being charged on loans.