When a lender goes through a loan application, the borrower’s credit score is one of the important factors linked to the approval, in addition to other factors like income, employment status, etc. The lenders want to be assured that the borrower has shown a decent repayment track record with no defaults in the past.  

Even with a high income and good employment status, if you have a bad credit score, the chances of you getting a loan is minimal. Even if you manage to get a loan, the rate of interest is going to be quite high.  

With a bad credit score, getting access to credit could be quite challenging in the loan market. However, this does not mean you have no borrowing options. Here, we have explored some of the ways using which an individual with bad credit score can get loans. 

Loan Against Assets 

You can get a quick loan by pledging your assets even with a bad credit score. As you mortgage your property, the lenders may be flexible in terms of eligibility criteria and sanction the loan that you need. The interest rates may be slightly higher as you have a bad credit score. However, this is one of the easiest ways through which you can get quick funds for your immediate needs. 

Gold Loan 

Gold Loan is another option available to those with a bad credit score. You can put your precious asset to use by pledging it and drawing a loan against it. As with other asset-based loans, around 70-80% of the value of your gold, as assessed by the lender, will be approved as a loan.  

An added advantage here is, if you are regular with loan repayments, your credit score should start improving soon. 

Gold loans do not take much time for processing as it does not involve a lot of documentation. Nowadays, gold loan companies are also giving the service of doorstep gold loans where the officials from the company come to your home, assess the gold that you are offering as pledge and instantly transfer money into your bank account either by IMPS or NEFT.  

Secured Credit Cards 

Secured Credit Cards is another way out for you. Credit cards are generally unsecured by nature as they are not backed by an asset. However, with a secured credit card, you offer your fixed deposit as a security against which a credit card can be issued to you.  

Secured credit cards allow you to access quick loans even with bad credit. If you have a fixed deposit, you can get a secured credit card. The credit limit is allotted against 70 to 80% value of the fixed deposit. 

Though you can get a secured credit card to manage your finance, this does not improve your credit score unless you have cleared your past dues or negative account which are the causes for your bad credit score.  

The best part of a secured credit card is that your money continues to earn interest at the same time you get a credit card which can be used for emergencies. But make sure to pay credit card outstanding promptly or else you risk losing out your fixed deposit.  

Get a Co-Applicant 

When you have a poor credit score, you can seek the help of a co-applicant to get a loan. It could be friends or family members. The co-applicant can be the primary applicant whose income and credit history will be considered for the loan. In case of a home loan, the rules might vary for a co-applicant as the banks lay down certain conditions 

Apply for loans from a Co-operative Banks/Non-Banking Financial Institutions 

While banks are insistent on a good credit score for lending, other non banking financial institutions and co-operative banks may not hold stringent criteria for credit score. They may be ready to lend to you at a higher rate of interest though.  

Co-operative banks require you to obtain a membership with them before making you eligible for borrowing. Many co-operative banks are not yet members with the credit bureaus, hence you may be able to get off with a low credit score. Although the interest charged would be much higher, and you might be better off by improving your credit score instead. 

Salary Advance 

There are a few financial services companies that offer half the amount of your monthly salary in advance to meet your short-term cash needs. These organizations do not consider credit score as the main criterion to give out the loans. The process is quick, and the loans are disbursed directly into your bank account after the approval. 

Early Salary is one such fintech company where you could get a salary advance of up to Rs 2,00,000 at an interest of just 2.5% per month. Moreover, you pay interest only on the amount that you utilize.  

Also, you may consider approaching your company for a salary advance. Many companies do have the provision of salary advances for their employees.  

Fintech/Online Lending Companies 

Fintech lenders are those companies which work in the financial sector. They make use of technology to make usual financial actions like investing, insuring and borrowing easier for the common man.  

Credy and Cashe are among the popular fintech companies. These companies rely on technology and each of them have their proprietary algorithm which helps them make lending decisions. Therefore, they lend even to those who have low or no credit scores.  

Borrowing through them is a simple online process. You would need to upload the documents needed on their App or website. Approval is quick and the amount directly reaches your bank account often within 48 hours.  

Peer to Peer Lending 

This is one of the fastest ways of getting instant cash, which could be done with a click of a button. Peer to peer lending platforms collect the personal information of the borrowers and process the application. It is quicker, and you can get hold of the cash immediately after the approval. The rules are more flexible, and chances are higher in accessing the credit. The interest rates tend to be little more than the title banking system due to its convenience and ease of application. 

Key Takeaway 

You can use one of the ways mentioned above to get loans when you are in dire need for money. Bad credit score is not something that lasts for eternity. You can always improve your credit standing by identifying the reasons that caused the downfall or get our expert help to improve your credit score.