In the present times, when technology has integrated with all aspects of the finance industry, the importance of a good credit score cannot be overstated. A credit score is the numerical representation of your creditworthiness, rated by agencies such as CIBIL or Experian. There are various parameters based on which your credit score is calculated. Some of the most important ones are:
1. Repayment History
2. Credit Card Utilisation Ratio
3. Exposure to Debt
4. Number of Loan Applications
5. Write-off of Debts
All financial institutions have started associating vital importance with the Credit Score of an individual,and it has become the most significant factor affecting your eligibility for availing credit facilities from various financial institutions.
Due to the uncertain financial and economic environment in the market, it is possible that you are not able to repay your EMIs on time or you have accumulated a lot of debt against your credit card. But the credit bureau does not give any consideration to this factor and would reduce your credit score significantly. If your credit score has been reduced by the bureau, it takes a number of months to improve the same. But it is vital that you undertake all efforts to repair your credit score, to enhance your eligibility for a loan in future.
One of the most useful ways to repair your credit score is to apply for a Personal Loan.
Where to get a Personal Loan with bad credit?
Personal Loans are unsecured loans that are offered by financial institutions for any purpose that you may require it for. Being unsecured, there is no need for you to hypothecate any collateral and can use the loan according to your wishes. The repayment tenure for Personal Loan extends up to 60 months, and rate of interest varies from lender to lender based on the borrower’s eligibility. Personal Loans are unsecured, most lenders require you to have a good credit score (above 700) to be eligible for the same.
Now you must be wondering, that you require a Personal Loan to improve your credit score, but in order to apply for a Personal Loan, you must have a good credit score. This is where it is essential to clarify that credit score is not the only parameter for approval of Personal Loan applications, many lenders are willing to accept fair credit score if you fulfill the remaining eligibility criteria.
So, you need to do your bit of research to find the lender who will be the answer to your question “Where to Get a Personal Loan with Bad Credit?”
How can a Personal Loan help in improving credit score?
If you are wondering even if you manage to get a Personal Loan with a low credit score, how can it help to improve your credit score, then you must read the analysis mentioned below.
1. Debt consolidation
Due to your dwindling finances, it might be possible that you have taken up several high-interest loans, which further deteriorated your financial position. Similarly, you might have racked up huge credit card bills that have impacted your credit score negatively. By taking a Personal Loan, you can consolidate all your small existing debts into one loan. As interest on Personal Loans is significantly lower than Credit Cards, you will save a significant amount of money on interest payments. This money can be utilised towards your EMI (Equated Monthly Instalment) repayments. It would also be easier for you to manage a single EMI as compared to multiple EMIs. This way your credit score will improve gradually over time.
2. Reduction of credit utilisation ratio
You can use the Personal Loan to reduce your Credit Card utilisation ratio. If your Credit Card utilisation ratio is above 30%, it will impact your credit score negatively. So, you must use the Personal Loan to bring your credit card utilization ratio below 30%. When you maintain this ratio for a number of months, your credit score will improve gradually over time.
3. Paying off high-interest loans
You can use your Personal Loan to repay other high-interest loans that you may have taken over time. Having a single running loan on your profile is preferable as compared to multiple small loans. By paying off your high-interest loans by making foreclosure or pre-payment, helps you to save a significant sum of money on the interest costs.
4. Improvement in credit history
You need to make sure that you pay the EMIs toward your new personal loan on time. Otherwise, the whole purpose of taking this new loan would be defeated. When you repay your EMIs on time, it will help significantly in rebuilding your credit history and would also convince the lenders that you have acquired financial discipline, which was earlier lacking. It is not that your credit history will change overnight, but it is at least a good beginning.
By using a Personal Loan smartly, you can ensure significant improvement in your credit score. But remember that improvement in credit score is a gradual process, and it might be a few months before you see any changes, but you must relentlessly pursue this matter.
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 60+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.