Areez and Laila were two individuals facing a financial challenge. They both knew the significance of personal loans in India and were eager to explore their options. However, there was a significant hurdle in their path – their less-than-ideal credit scores. Let’s delve into their journey to discover how they managed to secure personal loans despite their poor credit scores of below 750.
Importance of personal loans
Personal loans play a pivotal role in providing financial assistance during crucial times. Areez and Laila recognised this and understood that personal loans came with several advantages that made them indispensable. Here are the top compelling reasons why people opt for personal loans –
Cover unforeseen medical bills and treatments.
Merge multiple debts into a single, manageable loan.
Support your or your child’s education.
Fulfill your travel aspirations.
Upgrade and renovate your home.
Invest in the growth of your small business.
Buy essential appliances for your home.
Make your special day memorable.
Credit card debt
Pay off high-interest credit card debt.
Utilise the loan for smart investments.
Address immediate car or home repairs.
Enjoy festivals without financial constraints.
Credit score improvement
Use the loan responsibly to rebuild your credit.
Deal with sudden financial burdens.
Take a much-needed vacation with loved ones.
With these reasons in mind, Areez and Laila were determined to find a way to secure personal loans despite their less-than-favourable credit scores.
Tips on getting a personal loan with a low credit score
Select the right lender
Look out for lenders who offer personal loan to those with low scores. Not all lenders come with the same loan approval criteria, and some might exceedingly be willing to work with borrowers who have below-ideal credit histories. Research various lenders and their eligibility criteria to find the one that suits your situation.
Check your credit score
Before applying for a personal loan, it’s crucial to assess your credit score through agencies like CIBIL. This step allows you to understand your current credit standing. Your score is a numerical expression of your credibility, and it plays an important role in the personal loan approval procedure. It is an excellent practice to assess your credit report to detect any errors and address the same promptly.
Augment your income
Demonstrating your commitment to repay the loan is essential. Increasing your income through part-time work or freelancing can be a powerful way to do this. Lenders want assurance that you have the means to make timely loan payments. Additional income can improve your debt-to-income ratio, which is an important factor in the loan approval process.
Some lenders accept assets as collateral for personal loans. Collateral provides security for the lender in case of default and can increase your chances of approval. Be prepared to offer assets like a vehicle or valuable property as collateral when applying for a secured personal loan.
Adding a co-applicant with a better credit profile can considerably increase your approval chances. Lenders might view the guarantor or co-applicant, lowering the perceived risk linked with your loan application.
Credit utilisation ratio
Your credit utilisation ratio is the percentage of your available credit limit that you’re currently using. Repaying credit card debts promptly and maintaining a low credit utilisation ratio can positively impact your credit score. Lenders may view responsible credit card management as a sign of financial responsibility.
Reduce existing debts
Lowering your existing debts can ameliorate your debt-to-income (DTI) ratio and increase your credibility. Consider repaying off your high-interest debts, particularly credit card dues, as this can have a positive impact on your score and make you appear a more attractive loan borrower.
Timely bill payments
Consistently making timely payments of utility bills, rent, and other obligations demonstrates financial responsibility. Lenders often consider your payment history when evaluating your creditworthiness. Avoid late payments to maintain a positive financial track record.
Explain your situation
Draft a letter explaining your credit history and the reasons for needing the loan. Be honest and transparent about any financial challenges you’ve faced in the past. A well-written explanation can provide context to lenders and show your commitment to improving your financial situation.
Opt for smaller loan amounts
Applying for a smaller loan amount may increase your chances of approval. Smaller loans are perceived as lower risk for lenders, and they may be more inclined to approve them. Assess your financial needs carefully and consider borrowing only what is necessary.
Show stable employment
A consistent job history can instil confidence in lenders. Stability in employment demonstrates your ability to generate a steady income, making you a more reliable borrower. Avoid changing jobs frequently during the loan application process.
Interest rate comparison
Before zeroing in on a loan application, ensure to compare the HDFC Bank personal loan interest rate with other lenders to get the best loan deal. A lower rate of interest can make your loan highly affordable over the long term and lower your overall borrowing cost.
Consider online lenders, as some have more lenient criteria for personal loans. Online lenders often use alternative methods of assessing creditworthiness beyond just credit scores, making them more open to applicants with poor credit.
Plan your repayments effectively by calculating your Equated Monthly Installment (EMI) using HDFC’s online tool. This calculator helps you understand the monthly repayment amount, making it easier to budget for your loan.
In the end, Areez and Laila diligently followed these tips, and their determination paid off. Despite their less-than-ideal credit scores, they managed to secure personal loans to fulfil their financial needs. Over time, they not only achieved their goals but also improved their credit profiles.
Their journey taught them that a poor credit score may seem like a formidable obstacle, but with the right strategies and lenders like HDFC Bank, obtaining a personal loan is indeed possible. So, follow these tips, compare HDFC Bank personal loan interest rates with other options, and utilise the online HDFC Personal Loan EMI Calculator to plan your repayments wisely. Your path to financial stability starts here.